Penalties for Mistakes on a Tax Return

Each year, most Americans are required to submit a tax return to the IRS. For the most part, these returns are accurate and no further action is needed from the taxpayer. Some returns, however, will contain mistakes that need to be corrected immediately. If the IRS determines that you underpaid your tax liability, you could be subject to penalties and interest.

In a best-case scenario, you will pay a 20 percent penalty on top of the balance owed. In the event that the IRS believes that fraud occurred, you will pay a penalty of 75 percent on top of the balance owed. Those who have underpaid their taxes by hundreds of thousands of dollars or who committed egregious fraud may also face criminal charges.

Failing to file a tax return at all could result in a year in jail as well as $25,000 fine. In most cases, however, you will only be asked to pay the fine plus your principal balance and penalties. If you have failed to file taxes or are accused of engaging in tax fraud, you should hire an attorney immediately to rectify the situation.

Your attorney can negotiate with the IRS to reduce the penalties that you will face. Cases rarely get referred for criminal investigation as that requires additional paperwork and time spent on a case that may not yield enough money to make it worth the time and financial cost of prosecution.


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