In the old days when tax returns were filed in paper forms, many paper forms, some tax payers thought to be clever and put in a typing error in their advantage. An obvious fraudulent income tax return was created. And in the old days, the paper days, it could very well be possible that such a ‘slip of the pen’ was not discovered and then at the boring Dutch birthday parties, these stories were spread.
Old days are over, but not all tax payers have understood this, as the following example will show.
A Dutch tax payer paid in 2011 EUR 9.603,75 mortgage interest for the house he and his wife are living in. This is a deductible item in the income tax return. This tax payer used tax office downloaded software to complete the tax return of his wife and he changed the EUR 9.603,75 into EUR 96.038 mortgage interest deduction. This was done on March 12, 2012.
Then on March 23, 2012 he filed his own personal income tax return. And again he mentioned that the mortgage interest for 2011 was EUR 96.038. Apparently he was not yet satisfied with the outcome, so on March 27, 2012 he refilled his wife her income tax return and his income tax return where the EUR 96.038 mortgage interest was allocated such, that the highest income had the majority of the deduction.
Penalty for incorrect tax return
If you know that the banks report digitally to the tax office the mortgage interest amounts paid by the tax payers directly, the tax office quickly discovered the error. Not only the tax office discovered the error, they had the opinion it was not an error but deliberately done. An obvious fraudulent income tax return. Hence a 50% fine being EUR 10.852, was put on top of the adjusted tax assessment.
The tax payer argued the assessment, especially the 50% fine for a slip of the pen. He argued that it was never his intention to make a fraudulent return, but that he simply made an error. Moreover, the tax payer stated he made a mistake in the comma. In the Netherlands amounts over a thousand are divided by a point and under one euro, the amount is placed after a comma. See the amounts mentioned above.
The court disagreed. A slip of the pen is made once, but not three times. Moreover, the tax returns were send from different computers, which implies the full return had to be made at least two times. The argument that a mistake was made in the comma did not stand as well, as tax returns do not contain any information after the comma. A comma mistake would lead to EUR 96.037 not EUR 96.038.
Furthermore, the outcome of the tax return, a EUR 25.000 refund, for a monthly mortgage payment of EUR 800, should have made any person with common sense made to think something was not correct in the income tax return. And finally the previous tax year (2010) showed a similar ‘mistake’ in the income tax return. Hence the penalty of EUR 10.852 on top of the tax assessment was correctly issued by the Dutch tax office.
Orange Tax Services
The days that the tax payers or the tax consultants had the upper hand on the information flow are behind us. The tax office with their computer systems, connected systems and information exchange between many countries are on the upper hand. A fraudulent tax return is never a good idea. The period during which the tax office can adjust the tax return with a penalty is 5 years for a domestic tax return and 12 years for a tax return with international aspects. That is a long period to lay awake in your bed wondering what is going to happen.