Income tax fraud is serious business and can lead to a criminal conviction in addition to penalties being added to the tax amount due. Fraud is usually uncovered in one of two ways: someone reports illegal tax activities to the IRS or the IRS conducts an audit and finds evidence of fraud. A person is considered to be involved in income tax fraud when there is an intentional false representation of income or expenses or financial activities for the purpose of avoiding taxes. Fraud can involve things like making false statements, making misleading allegations, or hiding income or other important information. Fraud is an act that deceives another and encourages the person to act in a way that benefits the person instituting the fraud. Some of the more common fraud cases involve the buying and selling of real estate or failing to file tax returns. When an IRS suspects income tax fraud during an audit, the account may be turned over to the Criminal Investigation Division (CID). This division handles both personal and organized activity fraud cases. Sometimes fraud cases are resolved without going to court and only penalties are imposed. It depends on the nature of the fraud and the amount involved. IRS agents who work for CID are federal investigators with law enforcement training.