It’s no secret that most taxpayers prefer to have as little interaction as possible with the IRS. When it comes to communications with the Internal Revenue Service, no news is considered good news, and in most cases, the IRS has no cause to ask questions or conduct an audit. However, if someone commits tax fraud the IRS is likely to notice, and it can result in a heap of legal troubles.
This brings up the question of what happens when someone files a false tax return with the IRS. Can a little white lie result in financial penalties or possible prison time? Can you really go to jail for not being completely honest on a tax return? Here’s what you need to know about the consequences of filing a false tax return with the IRS.
What’s the Difference Between Tax Fraud vs Tax Evasion and Their Penalties?
The IRS investigates all types of tax errors, this includes both innocent mistakes and tax returns that are intentionally fraudulent. There’s a range of tax-related offenses that the IRS looks at, including everything from failure to file taxes to falsifying or omitting information. Similar to TV crime myths, there’s often a great deal of confusion about the difference between tax fraud vs tax evasion, and the penalties for each.
Tax evasion is the deliberate underpayment of taxes, including failure to pay altogether. Tax evasion might include transferring or hiding assets for the purpose of having a lower tax liability. In a way, tax evasion can be viewed as a subcategory of a broader category of tax-related crimes known as tax fraud.
Tax fraud occurs when a taxpayer fails to provide accurate and complete information to the IRS with a deceptive intent to minimize their tax liability. Tax fraud may include falsifying or underreporting income or overstating deductions.
When the IRS conducts an investigation or audit, they aren’t necessarily looking to throw someone in prison for the offense. The IRS understands that honest mistakes do happen and that in some cases, a lack of financial resources to pay a tax debt are often what’s behind the discrepancies they uncover.
When falsifying a tax return creates a situation where the taxpayer owes a relatively small amount of money to the IRS, they’ll typically be given the opportunity to rectify the situation and be required to pay additional fines.
Understanding Criminal Tax Penalties
Just because the IRS doesn’t always pursue fraudulent tax filers to the maximum extent of the law doesn’t mean they can’t. Generally speaking, the IRS is likely to go easier on someone who made an honest mistake or is experiencing financial hardship. The most severe criminal tax penalties are usually reserved for those whose intent was fueled by greed and fraudulent returns that involve larger sums of money.
To the question of whether you can go to prison for filing a false tax return with the IRS, the answer is yes. The amount of time you might spend in prison depends on the type and severity of tax fraud that was committed.
Simply failing to file a return can result in one year of jail time for each tax year that a return wasn’t filed. However, the IRS is more likely to work with you to put together a payment plan to settle your tax debt in this situation.
If filing a false tax returns leads to charges of tax evasion, the penalties are more severe than simply failing to file. Intentional tax evasion carries a penalty of up to five years in prison. If you’ve become involved in helping another individual evade taxes, such as knowingly and intentionally helping them hide assets, you can also find yourself facing a possible prison term of 3 to 5 years.
Should You Contact a White-Collar Crime Defense Attorney If You’re Being Looked at for Tax Fraud?
If you’re being investigated for possible tax fraud, you should treat it like any other criminal charges and contact a white-collar crime defense attorney before speaking to anyone – including the IRS. The Internal Revenue Services doesn’t press criminal charges against every person who commits a tax crime, however, it’s never safe to assume that you’ll be granted leniency. Broden & Mickelsen, LLP in Dallas have attorneys with experience in tax-related crimes and will prepare the strongest possible defense for your case.