With tax season at its height, it can be very tempting for individuals filing their returns or even professional tax preparers to fudge the numbers a bit for a better refund. While many slight misstatements go overlooked by the IRS, when the agency does initiate an enforcement action, they come with everything they have. If you've been accused of fraud or making false statements on a tax return, you face potentially dire consequences and should contact a taxpayer defense attorney as soon as possible.
Penalties range from 20 percent of tax underpayment to five years imprisonment
Filing a fraudulent return is considered misreporting your income by the IRS, and can result in criminal or civil penalties. Civil penalties are more common, as the government has to meet a lower burden of proof and has to dedicate fewer resources to investigation.
There are several levels of accuracy-related penalties for understating your income. Negligence - in other words, failing to make a reasonable attempt to comply with tax laws - and substantial understatement of income are the most common, and carry a penalty of 20 percent of the portion of the tax underpayment.
Civil fraud is a more serious issue. When there is clear and convincing evidence that some part of the understatement of tax was due to fraud, and that the taxpayer's intent was to evade the assessment of tax that he or she believed was owed, it could be a case of civil fraud. The penalty for civil fraud amounts to 75 percent of the tax underpayment.
Felony criminal statutes are the most powerful enforcement tool available to the IRS. When the IRS initiates a criminal case, the agency likely has very strong evidence. A criminal conviction for tax evasion can carry a prison term of up to five years, as well as substantial fines and charges to cover the cost of prosecution.
Build a strong case with the help of a taxpayer defense attorney
While both civil and criminal penalties for tax-related offenses can be stiff, there are ways to fight the case against you. For example, if you are assessed an accuracy-related penalty and can show that there was reasonable cause for the underpayment and you acted in good faith, the penalty cannot stand.
If you're facing a tax-related penalty or investigation by the IRS for purported inaccuracies on your tax return, be proactive and get in touch with a taxpayer defense attorney. The earlier you begin building your case, the better the odds that your attorney can secure a reduction or elimination of your penalty.Print this Page