To cut to the chase: no. In order for you to be charged with and found guilty of fraud, the mistake has to be “willful.” You have to have what we in the legal world calls mens rea- or a guilty mind. You need a guilty mind to prove intent.
What is needed to show intent?
Basically there are three things necessary to show intent: you had to know what you were doing, you had to know why you were doing it and then you needed to take specific actions (called actus reus) to show you were going to follow through. It would therefore be difficult to prove that someone suffering from dementia, for example, had intent because it is likely they did not know what they were doing, even if they followed through. This question was recently debated in a case of tax evasion for a well-know Texas businessman.
So, a mistake won’t have penalties then?
Whoa Nellie, no one ever said that! However, there are ways to mitigate any draconian penalties by acting quickly to remedy the mistake and filing an amended return. This is typically Form 1040-X.
However, there are serious penalties for those who can be shown to have mens rea and actus reus. If you have an income, always file a return. Why? If Al Capone’s tale* doesn’t imbue you with caution, consider this: The penalty for tax evasion (not filing) is a year in prison and fines of up to $100,000. Claiming you simply did not know what the law was is not enough to protect you if the IRS has any type of proof of mens rea.
*Al Capone was found guilty in 1931 of willfully failing to file tax returns. He was sent first to Cook County Jail, then the federal prison in Atlanta and then finally to secure lockup on Alcatraz Island, in the San Francisco Bay. He died after his release in Palm Springs, Florida, from complications of syphilis, which, curiously, included dementia. He was 48.