Penalties For Filing False/Fraudulent Tax Returns

Are you tempted to tailor your business or personal tax return numbers in your favor? Has your CPA intentionally prepared your return incorrectly to obtain better results? Altering numbers and omitting required information can subject you to penalties for tax fraud. Fraudulent tax returns involve deliberate misrepresentation, falsification, or omission of information presented.

Late filing, making mistakes on your returns, or not paying your taxes on time can subject you to fines, interest, and penalties. Tax fraud, however, is a more serious crime that carries higher penalties and sometimes criminal charges, such as imprisonment.

Tax fraud can include claiming inflated personal or business expenses, false deductions, not reporting all your income, taking unallowable credits or excessive exemptions, and manipulating income figures to obtain tax credits. Regardless of whether you prepare your own returns or have someone preparing them for you, you as the taxpayer will be held responsible for any fraudulent returns, including additional taxes, interest, and any penalties.

Typically, civil penalties are the remedy for being incompliant with federal tax rules. However, with tax fraud allegations, criminal charges may be imposed. Any person who willfully attempts to evade or defeat taxes can be charged with a felony, assessed large penalties, up to five years in prison, and any costs associated with prosecution. Criminal tax crimes include both felony and misdemeanor offenses, including willful failure to collect or pay tax, willful failure to file a return or supply information, fraudulent statements, and fraudulent withholding exemption certificates to name a few.

Penalties imposed by the IRS depend on the crime committed. Felony offenses, such as tax evasion or deliberately filing a false return, are punishable by up to five years’ imprisonment and fines up to $500,000. Misdemeanors, such as failure to file, however, are punishable by one year of imprisonment and fines under $200,000.

In the U.S., taxpayers have a legal duty to file and pay the correct amount of taxes. Falsifying or withholding information is a failure to do so and constitutes tax fraud. The U.S. tax system can be confusing, filing requirements and information are not always made obvious or readily available to individuals. Typically, taxpayers aren’t made aware of their mistakes until an IRS notice is mailed out. If you suspect the IRS may be investigating your tax returns for alleged fraud, or you have received notice in the mail that something is incorrect, reach out to Hone Maxwell LLP today to get it resolved.

Disclaimer: Hone Maxwell LLP articles and blogs are not intended as legal advice. Additional facts, facts specific to your situation or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information herein.

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