What Happens When You Lie on Your Taxes?

Nobody likes taxes. Everyone wants to pay the government less. In some cases, income taxes can lead to serious financial problems. Struggling businesses may be unable to afford heavy tax bills. Families may have to make sacrifices to pay what they owe. Unfamiliarity with complex tax laws can lead to confusion over what you owe to the IRS.

You should not lie about your taxes. However, many people get questions from the IRS over whether they paid the right amount in taxes. This article explains what happens when the IRS questions your tax return. It could have been a mistake, or it could involve tax fraud.

The Internal Revenue Service is powerful and can make life difficult for you. Tax fraud is also a serious crime. However, there can be many ways to resolve IRS questions and minimize potential penalties. If you’ve done nothing wrong or simply made an honest mistake, you will have the opportunity to prove your case and pay the right amount.

If the IRS has alleged you lied on your taxes, here are a few of the potential paths forward. Talk to an experienced tax attorney for the help you need. 

What Is a CP2000 Notice?

The IRS requires you to self-report income. However, that isn’t the only way the IRS gets information. Your employer is also required to report the amount they paid you on a W-2 they send to the IRS.

The IRS will send you a CP2000 notice if there is a difference between what you reported and other information about your income the IRS has on file. This is not yet an IRS audit, although it can become one.

Did you make an honest mistake? Now is the time to correct it. Just because you forgot to add a zero when filing your tax return doesn’t necessarily mean the IRS views you as a criminal. Correct any mistakes, recalculate your taxes, and pay any additional taxes you owe.

What Is a Tax Audit?

If the IRS sees something suspicious on your tax return or if you failed to file taxes at all, it may conduct an audit. This is more involved than a CP2000 notice. Getting a tax lawyer is critical if you are facing civil and criminal penalties. A lawyer can help you to prove your case, explain your options, and avoid further fraud penalties.

An audit is essentially an investigation of your tax return. You will have to provide documentation to the IRS so they can determine if you lied, misrepresented your income, or otherwise incorrectly paid your taxes. In some cases, an audit will include in-person interviews. Lying to the IRS in an audit is a crime.

An audit can be a lengthy, expensive, and exhausting process. Just because you are being audited does not mean you did anything wrong. The audit is your chance to prove you were correct, made an honest mistake, or otherwise are innocent of fraud.

What if I Get Convicted of Tax Fraud?

Tax fraud is more than just a mistake. Tax fraud is the willful avoidance of paying the taxes you owe. The government generally conducts a criminal investigation to determine if there was intentional fraud. A federal prosecutor needs to prove this in court for a criminal prosecution.

The IRS itself is part of the executive branch and does not sentence you for tax fraud. However, the IRS can help prosecute the case in criminal court. Lying to the IRS is a federal offense. Lying on your state taxes is a state tax crime and is prosecuted in state court.

If you are facing an investigation for possible tax fraud, you should talk to a professional tax attorney about your legal options.

Can You Go to Jail for Tax Fraud?

The good news is that the IRS doesn’t pursue criminal cases very frequently. For example, if you legitimately don’t have the money to pay the tax you owe, it’s unlikely the IRS will pursue criminal charges. However, they will continue collection efforts and assess penalties and interest. The bad news is that if you are one of those people facing criminal charges, the consequences are significant.

You can get jail time for tax fraud, depending on the specific charges. Usually, tax fraud and related charges are felonies. If convicted of felony tax fraud, the minimum sentence is one year. For some criminal offenses and amounts, the government can seek a sentence lasting decades.

Sentences vary according to federal sentencing guidelines and federal law. Common criminal charges associated with taxes include tax fraud, tax evasion, and identity theft. These are serious criminal charges and will result in significant prison time. A criminal defense lawyer can help you understand whether to accept a plea bargain or fight the charges in court.

What Are Civil Penalties for Tax Fraud?

If you are lying on your taxes, you can expect to pay hefty fines and fees. The IRS charges interest for late payments. Fees will depend on the results of the audit. If the IRS finds that you were negligent in determining your tax amount, you can expect to pay the IRS an additional 20% over the amount you originally owed. If you intentionally lied to the IRS, the penalty is 75%.

With fees and interest, taxpayers can sometimes end up paying much more than they would have if they had simply paid the tax to begin with. You can avoid these additional tax penalties by paying your original tax bill on time. If there are any accidental omissions or mistaken tax liability, fix the mistakes as soon as possible.

How Can a Federal Tax Attorney Help With a Fraud Investigation?

The IRS can garnish your paycheck and bank account, seize your assets, and make sure they get the money they are owed. There are significant penalties associated with not paying the taxes you owe or lying on your taxes. The IRS doesn’t audit many Americans, and it pursues criminal charges even less often. However, the penalties are serious enough that you should avoid making any false statements.

There are legal ways to reduce your tax burden. If you can’t pay the taxes you owe, you can negotiate a payment plan with the IRS.

Intentionally avoiding paying taxes or filing a false tax return can lead to criminal charges, prison time, fees, and penalties. If you received notice of an IRS audit or tax fraud investigation, contact a tax attorney for legal advice.