Penalties for lying on Income Taxes?

This is something that has been brought to my attention recently. I have a step-daughter who resides with me and my wife (we are in the US). Our taxes came back to us with a red flag because the child's father claimed her on his taxes and the IRS is going to contact him because of this, does anyone out there know what the penalties are for lying on your Federal and State Taxes during filing, as when filing you are asked if child resides permanently in your home, we have come to the conclusion that he of course said yes he lived with him. Anyone know what can happen over this?

6 Answers

Relevance
  • Belle
    Lv 5
    1 decade ago
    Favorite Answer

    In most cases, if he takes a deduction or claims a dependent he is not eligible to claim, they will simply recalculate his taxes correctly, make him pay the correct higher amount due, and in most cases charge him interest and other financial penalties that apply.

    If they prosecuted criminally everybody who lied a bit on their taxes, the system would collapse.

    They aren't going to try to throw him in the slammer or anything if he pays the revised bill. If he hires a good tax attorney, he'll also get substantially reduced penalties and fees than he would handling it himself.

    Source(s): Finance degree
  • 1 decade ago

    The penalties for telling a lie to the IRS can include prison, but probably not in this case. Regardless of what question your tax software may have asked for its own internal purposes, the actual question from the IRS is not "if child resides permanently in your home". It is something more like "Did the child spend at least 5 of the 12 months of the year either living in your home or temporarily absent to attend school, receive medical care, serve time in prison, etc., ... or not living at all, due to not having been born yet or being already dead..." It is so hard to understand every nuance and exception that proving that there was an intentional lie is nearly impossible. The IRS would probably be content to call it a negligent error, impose a large financial penalty, and go onto its next case.

  • Anonymous
    4 years ago

    If he has been doing this for years...wow. properly, there is not any statute of obstacles on fraud. for this reason, the IRS can circulate lower back as some years as needed to get the taxes corrected. he will owe the unique tax plus interest and consequences. The fraud penalty is seventy 5%. interest compounds daily commencing up with the due date of the tax return and ending whilst paid in finished. he is going to be financially ruined whilst (no longer if yet whilst) he gets caught. If the IRS decides to pursue offender fraud costs, he might additionally be dealing with detention center time as properly to the tax bill.

  • Anonymous
    1 decade ago

    This sounds more like a dispute or misunderstanding. The side that doesn't get the exemption will just have to pay additional tax.

  • How do you think about the answers? You can sign in to vote the answer.
  • tro
    Lv 7
    1 decade ago

    the parent with whom the child spends the majority 'nites' with claims the child's exemption

    if your return was rejected, protest it and have them prove the father is eligible to claim her

    if it is found he is wrong, he will have to pay back the overpayment he received plus interest for the amount of time

  • 1 decade ago

    But to actually answer the question posed there are a number of Sections of the tax laws that can be applied against a person. First you need to know that tax laws fall under Title 26 of the U.S. Code of Federal Regulations. Within Title 26 there are a multitude of Sections. For instance, Title 26: Section 61 deals with the taxability of income.

    The most common areas that can get you into Hot Water quickly are Sections 7201, 7203 and 7206.

    7201 covers an 'attempt to evade or defeat tax'. What it says is...

    "Any person who willfully attempts 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 imprisoned not more than 5 years

    = Or fined not more than $250,000 for individuals ($500,000 for corporations)

    = Or both, together with the costs of prosecution"

    Section 7203 deals with 'Willful failure to file return, supply information, or pay tax' and it says...

    "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 INFORMATOIN, 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 imprisoned not more than 1 years

    = Or fined not more than $100,000 for individuals ($200,000 for corporations)

    = Or both, together with cost of prosecution"

    There are two separate parts of Section 7206. The first part is for the primary person committing the fraud and it states...

    "Any Person who… (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 is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter; shall be guilty of a felony and, upon conviction thereof;

    = Shall be imprisoned not more than 3 years

    = Or fined not more than $250,000 for individuals ($500,000 for corporations)

    = Or both, together with cost of prosecution"

    and the second part is for anyone aiding or assisting in the fraud and it reads as...

    "Any person who…(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; shall be guilty of a felony and, upon conviction thereof:

    = Shall be imprisoned not more than 3 years

    = Or fined not more than $250,000 for individuals ($500,000 for corporations)

    = Or both, together with cost of prosecution"

    In regard to 'making a declaration under penalties of perjury' the law is generally referring to the Jurat. The Jurat is the fine print right above where a taxpayer signs and dates their tax return. It will contain language that reads something to the effect "Under penalties of perjury, the undersigned swears or attests that this return is true and correct..." So, since the return MUST be signed in order to be filed then when someone submits a return that is not totally correct and they sign it they are setting themselves up for prosecution.

    Click the first link below to read all this for yourself direct from the IRS website.

    G'Luck...

    Mike Womack, Sr. Partner

    Zero Degrees Tax LLP

    Moore, OK

Still have questions? Get your answers by asking now.