FAQ: Tax fraud penalties
Can I be charged with a crime if my taxes are done incorrectly?
Yes. Not only can the IRS can hand down civil penalties for improperly doing your taxes, federal prosecutors can charge you with a tax-related crime if you fail to file a tax return, provide false or fraudulent statements to the IRS, or willfully evade paying your full share of taxes.
What are the criminal penalties for failing to file a tax return?
You face up to one year in prison and up to $100,000 in fines (or up to $200,000 in the case of a corporation). These penalties also apply when a taxpayer fails to pay taxes on time or fails to supply information to the IRS.
What are the criminal penalties for making fraudulent or false statements to the IRS?
You face up to three years in prison and up to $250,000 in fines (or up to $500,000 in the case of a corporation). Making fraudulent or false statements can apply to statements made in your tax return or to government officials.
What are the criminal penalties for tax evasion?
You face up to five years in prison and up to $250,000 in fines (or up to $500,000 in the case of a corporation).
What is the difference between tax evasion and tax avoidance?
Tax avoidance is the legal process of taking advantage of strategies allowable by the tax code to reduce your taxes. Tax avoidance is therefore legal. Tax evasion is using strategies not allowed by the tax code to reduce or eliminate the taxes you pay. Tax evasion is illegal.
What are common methods of tax evasion that can result in criminal penalties?
- Failing to report income from a side job
- Failing to report income from rentals
- Failing to report income paid in cash
- Overstating deductions that do not exist, such as charitable donations not actually made
What if a person makes a mistake on their tax returns?
If you negligently make a mistake, then you still may owe civil penalties, but the government cannot convict you of a crime unless it was willful on your part. The standard of proof in showing willfulness is guilt beyond a reasonable doubt.
Can I be charged with a crime for assisting another person or entity in tax fraud?
Yes, as with most crimes, you can be charged with a tax-related crime as an accomplice if you assisted and/or encouraged another person to commit tax fraud.