When it comes to tax noncompliance, intent can make a significant difference in terms of the penalties a taxpayer faces. When the Internal Revenue Service investigates noncompliance, there are certain things auditors will investigate to get a better handle on the intent of the taxpayer. This is where the distinction between negligence and fraud is critical.
Tax fraud, of course, is always intentional, with the specific intent being to evade tax obligations. Tax negligence, on the other hand, involves a range of less reprehensible states of mind, including carelessness, recklessness and intentional disregard. Auditors are trained to look for specific indicators associated with either negligence or fraud.