And the penalty is just the start. The IRS can also charge you interest on the underpayment as well. While tax evasion or tax fraud is normally imagined as something that affects high earners and big executives, even those with lower incomes need to be careful.
When describing the penalties for tax fraud, the IRS does not differentiate between income amounts or how much you underpaid your taxes. Besides potentially owing thousands in IRS penalties, fees, and interest, you could also face criminal charges.
Criminal investigations and charges start when an IRS auditor detects possible fraud during their audit of your returns. Courts convict approximately 3, people every year of tax fraud, signaling how serious the IRS takes lying on your taxes. Finally, not reporting all of your income can have serious ramifications when it comes to buying a car or a home. When mortgage companies and banks review your application, they request copies of your tax returns to check your total income.
That means you may be denied for the loan you need, hurting your financial future. No one likes owing money at tax time or missing out on a big refund. But tax fraud is a serious criminal action, and glossing over your income or boosting your deductions counts as lying to the IRS. Saving yourself a little money at filing time can end up costing you thousands of dollars with auditing, penalties, and fines.
Save yourself the trouble and report your information accurately. The IRS has severe penalties in place, so perpetrators may pay a heavy price. Depending upon the specifics of your situation, you may face a variety of criminal penalties if you are caught lying about your income to the IRS.
Heavy fines and jail time are both possibilities for offenders. Less than 1 percent of individual tax forms are audited annually. However, there are certain red flags that may trigger an audit. While the IRS itself cannot jail offenders, the courts can. Criminal investigations and charges start when an IRS auditor detects possible fraud during an audit of your returns. Courts convict approximately 3, people every year of tax fraud, signaling how serious the IRS takes lying on your taxes.
The length of the sentence for lying on a tax return depends largely upon the specific details of your situation. These details determine the exact charge against you. That determines the penalties you may face. The odds of the IRS charging you for fraud is relatively small.
Even if you are investigated, the chances of you facing a criminal charge are pretty slim. However, with the potential consequences being as severe as they are, lying on a tax return is not worth the risk just to get a little extra money in your refund. In addition to massive fines, penalties and potential jail time, lying on your taxes to reduce your income can have other negative ramifications.
For example, it can impact your ability to secure lines of credit. When mortgage companies and banks review your application, they request copies of your tax returns to check your total income. That means you may be denied for the loan you need, hurting your financial future. Moreover, failing to file a return at all can completely tank your credit report.
So, not only do lenders not have an accurate picture of your income, they see a less than stellar credit report as well. Nobody likes owing money to the IRS at the end of the year or getting a miserly refund.
However, tax fraud is a serious crime. There are a number of legal ways to get a bigger tax refund. Saving yourself a little money at filing time can end up costing you thousands of dollars.
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