“In this world, nothing can be said to be certain, except death and taxes” is a quote often attributed to Benjamin Franklin. With that in mind, it’s best to be prepared, at least financially, for taxes and tax season each year.
The Risks
When it comes to deductions, things can get a little sticky. What’s the harm in taking a little extra here or a little extra there?
Taxpayers “shouldn’t gamble with their taxes by padding their deductions,” says IRS Commissioner John Koskinen. Overstating charitable contributions, padding business expenses, and falsely claiming earned income or child tax credits are common ways unscrupulous taxpayers try to cheat the IRS. But the organization is wise to these gambits and is catching cheaters with its efficient automated systems.
The Penalties
If you knowingly file incorrect tax returns, the government may apply the following civil penalties:
- 20% of the disallowed amount for filing an erroneous claim for a refund or credit
- $5,000 for filing a “frivolous tax return” — that is, one missing enough information to figure the correct amount or one that contains substantially incorrect information
- In addition to the tax owed, a 75% penalty if the underpayment resulted from tax fraud
The IRS also can take you to criminal court and seek additional fines and/or prison time if it suspects and proves you are guilty of the following:
- Tax evasion
- Purposely failing to file a return or pay taxes due
- False or fraudulent statements
- Identity theft
If you have questions, contact an MCB Tax Advisor at 703-218-3600 or click here. To review our tax news articles, click here. To learn more about MCB’s tax practice and our tax experts, click here
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