Did you Knowingly File False Tax Returns (How to Resolve)
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Did you Knowingly File False Tax Returns
Part of being a human being is making bad decisions. We have all made them– with some bad decisions being worse than others. When it comes to filing a false tax return, the IRS views it as a very serious situation, because it is equivalent to stealing from the IRS, which is a form of tax fraud or tax evasion. For example, if Peter earned $1M in income and filed his tax returns accurately — after accounting for expenses and other deductions — he has a $300,000 net effective tax liability. If instead, Peter only reports 50% of his income, he may only have a $100,000 net effective tax liability at the reduced rate (after deductions). The IRS views this as a theft. Essentially, Peter evaded tax and stole $200,000 from the IRS – which is why the IRS aggressively enforces these types of tax violations. Let’s take a brief look at what to do if you knowingly filed false tax returns.Civil Violation for Filing False Tax Returns
Expanding on the example above, Peter would have presumably violated the civil tax fraud statute and could become subject to a 75% penalty for the underpayment, which can be a significant penalty. This is in addition to other civil penalties that could be issued, especially if there are international reporting issues, such as FBAR or Form 8938. One important fact about civil tax fraud is that there is no statute of limitation — so the IRS is not limited to the usual 3-or-6 year statute.Criminal Tax Violation for Filing False Tax Returns
There are many tax crimes that a Taxpayer could be hit with if they file a fraudulent tax return – especially because it is considered an affirmative act, which could lead to tax evasion, which is a felony. Here are some of the more common tax crimes:Tax Evasion – I.R.C. § 7201
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Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.
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Willful Failure To Collect Or Pay Over Tax – I.R.C. § 7202
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Any person required under this title to collect, account for, and pay over any tax imposed by this title who willfully fails to collect or truthfully account for and pay over such tax shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $10,000, or imprisoned not more than 5 years, or both, together with the costs of prosecution.
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Failure To File, Supply Information Or Pay Tax – I.R.C. § 7203
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Any person required under this title to pay any estimated tax or tax, or required by this title or by regulations made under authority thereof to make a return, keep any records, or supply any information, who willfully fails to pay such estimated tax or tax, make such return, keep such records, or supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $25,000 ($100,000 in the case of a corporation), or imprisoned not more than 1 year, or both, together with the costs of prosecution. In the case of any person with respect to whom there is a failure to pay any estimated tax, this section shall not apply to such person with respect to such failure if there is no addition to tax under section 6654 or 6655 with respect to such failure. In the case of a willful violation of any provision of section 6050I, the first sentence of this section shall be applied by substituting “felony” for “misdemeanor” and “5 years” for “1 year”.
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Fraudulent statement or failure to make statement to employees – I.R.C. § 7204
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In lieu of any other penalty provided by law (except the penalty provided by section 6674) any person required under the provisions of section 6051 to furnish a statement who willfully furnishes a false or fraudulent statement or who willfully fails to furnish a statement in the manner, at the time, and showing the information required under section 6051, or regulations prescribed thereunder, shall, for each such offense, upon conviction thereof, be fined not more than $1,000, or imprisoned not more than 1 year, or both.
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Fraudulent Withholding Exemption Or Failure To Supply Information – I.R.C. § 7205
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(a)Withholding on wages Any individual required to supply information to his employer under section 3402 who willfully supplies false or fraudulent information, or who willfully fails to supply information thereunder which would require an increase in the tax to be withheld under section 3402, shall, in addition to any other penalty provided by law, upon conviction thereof, be fined not more than $1,000, or imprisoned not more than 1 year, or both.
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(b)Backup withholding on interest and dividends If any individual willfully makes a false certification under paragraph (1) or (2)(C) of section 3406(d), then such individual shall, in addition to any other penalty provided by law, upon conviction thereof, be fined not more than $1,000, or imprisoned not more than 1 year, or both.
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Fraud And False Statements – I.R.C. § 7206
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(1) Declaration under penalties of perjury Willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter; or
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(2) Aid or assistance Willfully aids or assists in, or procures, counsels, or advises the preparation or presentation under, or in connection with any matter arising under, the internal revenue laws, of a return, affidavit, claim, or other document, which is fraudulent or is false as to any material matter, whether or not such falsity or fraud is with the knowledge or consent of the person authorized or required to present such return, affidavit, claim, or document; or
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(3) Fraudulent bonds, permits, and entries Simulates or falsely or fraudulently executes or signs any bond, permit, entry, or other document required by the provisions of the internal revenue laws, or by any regulation made in pursuance thereof, or procures the same to be falsely or fraudulently executed, or advises, aids in, or connives at such execution thereof; or
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(4) Removal or concealment with intent to defraud Removes, deposits, or conceals, or is concerned in removing, depositing, or concealing, any goods or commodities for or in respect whereof any tax is or shall be imposed, or any property upon which levy is authorized by section 6331, with intent to evade or defeat the assessment or collection of any tax imposed by this title; or
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(5) Compromises and closing agreements In connection with any compromise under section 7122, or offer of such compromise, or in connection with any closing agreement under section 7121, or offer to enter into any such agreement, willfully— (A)Concealment of property Conceals from any officer or employee of the United States any property belonging to the estate of a taxpayer or other person liable in respect of the tax, or (B)Withholding, falsifying, and destroying records Receives, withholds, destroys, mutilates, or falsifies any book, document, or record, or makes any false statement, relating to the estate or financial condition of the taxpayer or other person liable in respect of the tax;
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Fraudulent Returns, Statements, Or Other Documents I.R.C. § 7207
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Any person who willfully delivers or discloses to the Secretary any list, return, account, statement, or other document, known by him to be fraudulent or to be false as to any material matter, shall be fined not more than $10,000 ($50,000 in the case of a corporation), or imprisoned not more than 1 year, or both. Any person required pursuant to section 6047(b), section 6104(d), or subsection (i) or (j) of section 527 to furnish any information to the Secretary or any other person who willfully furnishes to the Secretary or such other person any information known by him to be fraudulent or to be false as to any material matter shall be fined not more than $10,000 ($50,000 in the case of a corporation), or imprisoned not more than 1 year, or both.
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