Can you go to prison for fake deductions?

| by Max Soni

Thanks for visiting Spodek Law Group. We’re a second-generation law firm managed by Todd Spodek, with over 40 years of combined experience handling federal criminal cases. You’ve probably heard about some of our high-profile cases – Anna Delvey’s Netflix series, the Ghislaine Maxwell juror misconduct case, or the Alec Baldwin stalking matter. We’ve built our reputation on taking cases other firms say are unwinnable.

If you’re reading this, you’re probably wondering whether fake tax deductions can land you in federal prison. The short answer – yes, absolutely. In 2025, the IRS is prosecuting these cases aggressively, and people are getting multi-year prison sentences for fabricating deductions. We’re seeing this constantly in our practice.

The IRS doesn’t mess around with intentional fraud. In May 2025, a Bronx tax preparer got four years in prison for a $145 million scheme involving bogus deductions and phony business expenses. In September 2025, an Augusta man received 46 months for filing false returns with fabricated deductions – he owes over $1 million in restitution. Prison time is real, and it’s happening right now.

Mistakes vs. Intentional Fraud

The IRS knows taxes are complicated. You might legitimately misunderstand whether something qualifies as a deduction. That’s different from making up expenses that never existed.

What matters is willfulness – did you know you were lying when you claimed the deduction? That’s the line between a civil penalty and criminal prosecution. Civil fraud requires “clear and convincing” evidence. Criminal tax crimes require proof “beyond a reasonable doubt.” The government has to prove you knew what you were doing was wrong and you did it anyway.

A Charlotte woman pled guilty to creating fake deductions and enhancing expenses on client returns. The tax loss – around $500,000. She faces three years in prison. She crossed from mistake into deliberate fabrication.

Federal prosecutors look at patterns. One questionable deduction might get you an audit. Systematic fabrication across multiple years – fake home office expenses, business meals that never happened, charitable contributions you never made – that’s when they refer the case for criminal investigation.

What Behavior Gets You Prosecuted

Certain schemes trigger criminal prosecution almost automatically. Creating entirely fake businesses to claim Schedule C expenses is common. The IRS saw this explosion during the pandemic – people inventing businesses that never existed to claim deductions and unemployment benefits.

Tax preparers who operate “ghost” businesses are getting hammered in 2025. They file returns without credentials, charging fees based on refund percentage. They fabricate income to qualify clients for credits, then pile on fake deductions.

Social media scams are another focus area. The IRS assessed $162 million in penalties in September 2025 over false credit claims promoted on social media. People see TikTok videos claiming you can deduct your car as a business expense when you drive for Uber twice a month. They file based on this garbage advice, and they’re facing denied refunds, penalties, and potential prosecution.

Gambling losses claimed as business expenses. Medical expenses you never paid. Donations to charities that don’t exist. Business travel that was actually a family vacation. These all show up in prosecution cases.

The Actual Penalties

Under 26 U.S. Code § 7206 – fraud and false statements – you’re looking at up to three years in prison and fines up to $250,000 for individuals. That’s for making a false return. Tax evasion under 26 U.S. Code § 7201 carries up to five years in prison and $250,000 in fines.

Those are just the criminal penalties. The IRS will also hit you with a 75% civil fraud penalty on top of the tax you owe. So if you underpaid $50,000 because of fake deductions, you owe the $50,000 plus another $37,500 as a penalty, plus interest that’s been accruing for years.

There’s also a 20% accuracy-related penalty if your deductions exceed your actual tax liability by more than 10% or if the understatement exceeds $5,000.

Restitution is mandatory in criminal cases. You’ll pay back every dollar the government lost, plus you’ll serve time, plus you’ll have a federal conviction permanently. IRS Criminal Investigation maintains a 97.3% conviction rate. When they decide to prosecute, they win. The average sentence is 37 months in federal prison.

When the IRS Comes Knocking

An audit and a criminal investigation are completely different. In an audit, you get a letter asking you to substantiate deductions. You provide documentation, or you don’t, and the IRS adjusts your tax liability. It’s administrative.

A criminal investigation means special agents from IRS Criminal Investigation are building a case against you. They don’t send a letter first – they show up at your door wanting to talk. This is when people make catastrophic mistakes.

You talk because you think you can explain yourself. They’re not there to help you. Anything you say gets used against you in court. IRS-CI agents are trained law enforcement – they carry badges and guns, and their job is to build criminal cases.

The moment you realize the IRS is looking at you criminally, stop talking. Immediately. Get a lawyer who handles federal tax crimes. Not your accountant. Not the guy who prepared your returns. A criminal defense attorney who knows how these prosecutions work.

At Spodek Law Group, we’ve handled federal criminal cases for years. We understand how federal prosecutors build these cases, what they’re looking for, and how to defend against charges that can destroy your life. Todd Spodek is a second-generation criminal defense lawyer who’s spent years in federal court. Our team includes former federal prosecutors who know exactly how the government approaches these investigations.

We don’t just handle routine cases. Many of the cases we’re famous for handling – like Anna Delvey conning New York’s elite, or the juror misconduct in the Ghislaine Maxwell trial – are cases others said were unwinnable. That’s because we fight for our clients, not to maintain relationships with prosecutors.

Don’t Wait Until They File Charges

If you know you claimed deductions you shouldn’t have, waiting is the worst thing you can do. The statute of limitations for tax fraud is six years, but it doesn’t start running until they discover the fraud.

Sometimes we can resolve these situations before charges get filed. An experienced attorney can negotiate with the IRS and potentially keep your case in the civil system instead of the criminal system. Once charges are filed, your options narrow dramatically.

Federal sentencing is serious. These aren’t state charges where you might get probation. Federal guidelines calculate sentences based on the tax loss amount. A $500,000 tax loss puts you in a guideline range that starts with multiple years in federal prison.

Can you go to prison for fake deductions? Yes – people are doing it right now in 2025, serving multi-year sentences in federal facilities. The IRS is prosecuting these cases aggressively, especially when social media scams and systematic fraud are involved. The conviction rate is nearly 100%, and the average sentence is over three years.

If you’re under investigation, or you think you might be, call us immediately. We’re available 24/7, and we’ve been handling federal criminal cases like this for decades. Don’t talk to the IRS without representation. Don’t try to handle this yourself. Your freedom is on the line.