Tax Fraud IRS Penalties

Failure to pay and file taxes according to tax law comes with various penalties. One of the most serious, however, is tax fraud. The Internal Revenue Service (IRS) imposes much harsher penalties for tax fraud than for other offenses. Tax fraud can even result in criminal charges and time in jail. For regular tax collection, the IRS can only go back ten years. If the agency suspects you of tax fraud, however, there is no statute of limitations.

If you think you're under investigation for tax fraud by the IRS, don't wait to act. You should work to resolve this situation immediately. An experienced California tax attorney can help you understand your rights and your options when facing IRS tax fraud.

What Constitutes Tax Fraud?

Tax fraud is cheating on a tax return to avoid having to pay your total tax. It could involve falsifying information on your tax return, intentionally failing to file or to pay, or deliberately failing to report all income received. Tax evasion is also a form of tax fraud.

Tax Fraud Charges

When the IRS accuses you of tax fraud, you could face both civil and criminal charges. If it's a criminal case and the IRS recommends that you be prosecuted, the agency will hand your case to federal prosecutors, such as the Department of Justice.

Examples of tax fraud charges:

  • Willful failure to collect or pay over tax
  • Intentionally failing to file, withhold information, or pay a tax
  • Making a fraudulent statement to employees
  • Providing a fraudulent withholding exemption certificate
  • Giving false statements

Penalty for IRS Tax Fraud

The penalties for tax fraud differ for civil and criminal cases. Civil tax fraud penalties aren't as harsh as criminal ones.

Civil Penalties

The civil penalties for tax fraud are monetary only. The civil penalty for fraudulently failing to file a return is 15% of the tax due for each month it remains unpaid, up to 75% maximum. If you file a return and it's fraudulent, the penalty is 75% of the underpayment.

Criminal Penalties

Any willful attempt to evade or defeat taxes is a felony. Penalties for tax fraud of this kind can be up to $100,000 ($500,000 for a corporation) or up to five years in prison. Willful failure to file, pay tax, or keep sufficient records carries a fine of up to $25,000 for individuals and $100,00 for corporations. It could also get you one year in prison.

Can I Challenge Tax Fraud Penalties

If you're facing tax fraud penalties, you can dispute them. Mistakes on tax returns – without any fraudulent intention – happen all the time. Most people don't realize the IRS is investigating them for tax fraud until they receive a notice from the agency. If you didn't intend to defraud the government, you shouldn't have to face tax fraud penalties.

Help with IRS Tax Fraud

If you've realized that the IRS may be investigating you for tax fraud, you should seek the advice of an experienced tax attorney right away. Contact a California Tax Attorney to set up a consultation and discuss your options.

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