Fudging the numbers: What happens when you lie on your taxes?

From generous estimations to outright lies — what happens when you lie on your taxes? The lure of a lower tax bill or higher tax refund may tempt taxpayers to fudge the numbers on their tax return. However, such maneuvers can come with serious consequences.

How serious are the consequences?

Not surprisingly, the severity of the consequences generally depends on how much was altered on the returns. Rounding up to the nearest ten, for example, may come with a fine. The amount of the fine will depend on how much the change impacted your tax obligations. In addition to the fine, the agency will likely expect you to pay the correct tax amount as well as interest.

In contrast, intentionally failing to report income, could come with prison sentence.

How will the IRS know?

The Internal Revenue Service (IRS) gets a copy of the W-2s and 1099s. Basically, if you get a tax form in the mail, it is like the IRS does, too. As a result, they will be expecting tax returns and already have a pretty good idea of how much you will owe.

What happens if the IRS thinks I lied?

If the agency is concerned with your tax returns, it may conduct an audit. A tax audit generally involves a review of your tax filings. This can include the agency sending you a mailing requesting additional information. In rare cases, it could involve a field agent coming to your door. It will not include an email or text message. Any communication in this form claiming to be from the IRS is likely a scam.

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