Reporting fraud or false information on a tax return creates a different category of risk than an ordinary “audit adjustment.” You sign a return under penalties of perjury, and the government can treat deliberate false reporting as evidence of willfulness, not mere negligence. That shift matters because the IRS can move from a civil compliance posture to a criminal tax investigation when it sees affirmative conduct that suggests concealment, fabrication, or intentional underreporting. IRS Criminal Investigation’s annual reports reflect that CI develops cases for prosecution and achieves a very high conviction rate once matters reach that stage.
You should also understand how the civil statute of limitations changes when fraud is involved. The normal three-year assessment period does not control when the IRS alleges you filed a false or fraudulent return with intent to evade tax, because the Code permits assessment “at any time” in that scenario. That reality makes “running out the clock” a fantasy in actual fraud cases. It also raises the stakes for everything you do after you spot the problem, mainly interviews, document production, amended returns, and communications that can solidify an intent narrative.
Civil Consequences: Tax, Interest, and Penalties That Can Follow You for Years
When the IRS concludes that you underreported income, inflated deductions, fabricated credits, or otherwise filed inaccurately, it can assess additional tax plus interest. In many cases, the IRS also asserts accuracy-related penalties. For example, the Code imposes a 20 percent accuracy-related penalty on underpayments attributable to negligence or substantial understatement in common audit fact patterns. If the IRS believes fraud drove the underpayment, the exposure escalates sharply because the civil fraud penalty equals 75 percent of the portion of the underpayment attributable to fraud.
The civil statute of limitations also becomes a weapon when the IRS frames the conduct as fraudulent. The Code allows the IRS to assess at any time if you filed a false or fraudulent return with intent to evade tax. Even without fraud, the IRS can get a longer window in certain substantial omission scenarios. In practical terms, once fraud allegations appear, you should assume the government will expand years, entities, and transaction categories, then use third-party documentation to harden its proof.
Criminal Consequences: the “Life-Altering” Layer You Must Take Seriously
If the government believes you acted willfully, it can pursue criminal tax charges that carry incarceration, felony records, restitution, and collateral damage to professional licenses, immigration status, employment, and reputation. One common charging statute for false return conduct is 26 U.S.C. § 7206(1), which targets willfully signing a return you do not believe is true and correct as to every material matter. Conviction exposure under this statute includes imprisonment and substantial fines under federal law. More severe fact patterns can trigger felony tax evasion charges under 26 U.S.C. § 7201, which carries higher maximum incarceration and fine exposure.
You also need to understand timing. Many serious federal tax crimes carry a six-year criminal statute of limitations, including tax evasion and several false-return offenses specifically listed in 26 U.S.C. § 6531. That timeline often gives the government more runway than taxpayers expect, especially when it develops proof through records, third-party subpoenas, and interviews rather than relying on what you volunteer.
California can add another layer of criminal tax exposure when the facts touch state returns or state reporting. California Revenue and Taxation Code section 19705 makes it a felony to willfully make and subscribe a return, statement, or other document under penalty of perjury that you do not believe to be true and correct as to every material matter. California also criminalizes certain willful failure-to-file and false-information conduct under Revenue and Taxation Code section 19706. The California Franchise Tax Board’s Criminal Investigation Bureau uses sworn special agents to investigate felony violations of the Revenue and Taxation Code, including income tax evasion and fraud.
Defense Steps That Reduce Damage and Keep You From Making it Worse
If you believe you reported fraud or false information, you should treat the situation as potential criminal tax exposure immediately. Start with disciplined containment. Do not “explain” the issue directly to the IRS, and do not improvise in interviews. Treat every statement as something the government can later frame as proof of intent.
You should also avoid the common impulse to rush out an amended return without legal control. Amended filings can help in the right posture. Still, they do not erase the original return, and they can create new admissions if you file them carelessly or after the government already developed interest. You need counsel to evaluate timing, narrative risk, and whether the facts support a controlled corrective strategy or a different approach.
If your conduct was willful and you want to get ahead of criminal exposure, you should ask counsel about whether the IRS Criminal Investigation Voluntary Disclosure Practice fits your situation. The IRS states that a voluntary disclosure must be truthful, timely, and complete, and it must reach IRS Criminal Investigation before the IRS initiates a civil examination or criminal investigation of you, and before the IRS receives information from a third party about your noncompliance that would make the disclosure untimely. The IRS also makes clear that voluntary disclosure does not automatically guarantee immunity from prosecution. Still, CI may consider a timely, accurate, and complete disclosure when deciding whether to recommend prosecution.
Throughout this process, you must preserve records and avoid any conduct that looks like concealment or destruction. You should let experienced dual-licensed attorneys & CPAs supervise fact development, document collection, and communications strategy so you correct what you can without manufacturing intent evidence.
Contact the Tax Law Offices of David W. Klasing if You Reported Fraud or False Information on a Tax Return
Contact the Tax Law Offices of David W. Klasing if you believe you reported false information, concealed income, overstated deductions, or otherwise crossed the line from a defensible mistake into willful conduct. Once fraud enters the picture, the case stops functioning like a routine audit. The IRS can assess at any time on a fraudulent return, and the government can pursue felony statutes that carry incarceration, heavy fines, restitution exposure, and lasting professional and personal consequences. You need a defense strategy that treats every interaction with the government as evidence-sensitive from the first call.
You should also contact us if you need a team that can manage a civil audit strategy and criminal tax risk within a single, coordinated plan, including disciplined control of interviews, calibrated document production, and a fact narrative designed to prevent the government from mischaracterizing corrections as admissions of intent. We focus on high-risk civil audits and criminal tax investigations, and we structure representation to reduce the probability of criminal referral while positioning you for the least damaging outcome if the government escalates.
If you want a straightforward credibility check before you engage counsel, you can review third-party and public indicators. The Better Business Bureau currently lists the Tax Law Offices of David W. Klasing with an A+ rating, and Avvo lists David W. Klasing with a 10.0 rating. Call (800) 681-1295 or use the firm’s online contact options HERE to request a confidential, reduced-rate initial consultation.
