NATIONALLY RECOGNIZED FEDERAL LAWYERS
How serious is lying on tax return?
|Thanks for visiting Spodek Law Group – a second-generation law firm managed by Todd Spodek. With over 40 years of combined experience, we’ve represented thousands of clients since 1976. You might recognize us from high-profile cases like the Anna Delvey Netflix series, the Ghislaine Maxwell juror misconduct case, or the Alec Baldwin stalking case. If you’re reading this, you’re probably worried about your tax return – maybe you’ve already filed something that wasn’t entirely accurate, or you’re wondering just how much trouble you could face. The short answer: lying on your tax return is a federal crime, and it’s taken very seriously.
This article covers what happens when someone lies on their tax return, the difference between civil penalties and criminal prosecution, and what the IRS actually looks for when they suspect fraud.
The IRS knows when you’re lying
The IRS receives copies of every W-2, 1099, and financial document that gets sent to you. Every single one. When you file your return, their systems automatically compare what you reported against what they already have on file. If the numbers don’t match – they notice. They always notice.
In 2025, the IRS assessed $162 million in penalties just for false tax credit claims tied to social media scams. The agency uses algorithms that compare your deductions to others in your income bracket – if you’re claiming significantly more than people who make what you make, that triggers a review. Math errors, income-to-lifestyle discrepancies, unreported income from side gigs – all of this gets flagged automatically before a human even looks at your return.
People think they can hide cash income or inflate deductions and the IRS won’t catch it because they process millions of returns. That’s wrong. The detection systems are sophisticated, and once you’re flagged, an actual agent starts digging through everything.
Civil penalties versus criminal prosecution
There’s a massive difference between civil tax penalties and criminal tax prosecution – and understanding this distinction matters if you’re trying to figure out how much trouble you’re actually facing.
Civil penalties are what most people deal with. If the IRS determines you made a mistake or were negligent, you face an accuracy-related penalty of 20% of the underpayment. But if the IRS proves civil fraud, that penalty jumps to 75% of what you didn’t pay. No jail time with civil penalties, but the financial hit is significant.
Criminal prosecution is different entirely. The IRS must prove your actions were willful – that you intentionally tried to evade taxes you knew you owed. Much harder to prove. But if they prove it, you’re facing felony charges.
Tax evasion under 26 U.S.C. § 7201 carries up to five years in federal prison and fines up to $250,000 for individuals. Filing a false return – that’s three years maximum per count. In fiscal year 2024, IRS Criminal Investigation maintained a 90% conviction rate. When they bring criminal charges, they win nearly every time.
What triggers criminal investigation
The IRS doesn’t prosecute everyone who makes a mistake on their taxes. They prosecute people who engage in conduct that looks deliberate, substantial, and provable beyond reasonable doubt. What makes them refer a case? Multiple years of the same pattern – claiming the same fake deductions year after year, consistently underreporting the same income source. Large dollar amounts matter too. If you underreported $3,000 once, that’s probably staying civil. If you underreported $300,000 over three years, you’re getting a criminal referral.
In 2025, the IRS initiated over 2,667 criminal investigations in fiscal year 2024 and identified over $9.1 billion in fraud. Federal prosecutors are selective. They want cases with clear evidence, significant dollar amounts, and defendants who clearly knew what they were doing.
False documents push cases toward criminal. If you created fake receipts, forged W-2s, or submitted manufactured paperwork to support your claims – that’s not negligence, that’s deliberate fraud. Same with offshore accounts you didn’t disclose, cash businesses where you kept two sets of books, or cryptocurrency transactions you “forgot” to report. The pattern of concealment is what transforms a tax mistake into a federal crime.
What actually happens when you get convicted
Recent cases from 2025 show the reality. A paving contractor who evaded taxes got six months in federal prison and was ordered to pay $989,819 in restitution. A roofing business owner received one year and one day in prison and $449,329 in restitution. These aren’t billionaires running elaborate schemes – these are business owners who didn’t report cash income and got caught.
Sentencing depends on the amount of loss to the government, whether you obstructed the investigation, your criminal history, and whether you accepted responsibility. Federal sentencing guidelines calculate everything mathematically. Accepting responsibility early – before trial – can reduce your sentence by two or three levels. That’s substantial.
What you should do if you’ve already lied
If you filed a return with false information and haven’t been contacted by the IRS yet, you have options – but you need to move quickly and carefully.
The IRS allows amended returns. You can file Form 1040-X to correct errors and report additional income you left off originally. Filing an amended return before the IRS contacts you shows you’re trying to fix the mistake voluntarily. That matters for whether they pursue criminal charges. It doesn’t eliminate civil penalties – you’ll still owe the tax, interest, and likely some penalty – but it significantly reduces the chance of criminal prosecution.
Do not file an amended return without talking to a lawyer first if the amounts are substantial or if you think you might already be under investigation. Once you submit that amended return, everything you write becomes a statement to the government. If you contradict yourself or leave things out again, that makes your situation worse.
Why you need a lawyer who understands federal tax prosecution
At Spodek Law Group, we’ve handled federal criminal cases for decades – including tax fraud, wire fraud, money laundering, and other white-collar charges that often accompany tax prosecutions. Our team includes former federal prosecutors who understand exactly how the government builds these cases, what evidence they prioritize, and what leverage exists at different stages of the process.
Tax cases are technical. The line between a mistake and a crime often comes down to your state of mind – what you knew, when you knew it, whether you acted willfully. Prosecutors will comb through years of records, interview your accountant, subpoena your bank statements, and build a timeline that shows a pattern. You need someone who knows how to challenge their interpretation of the evidence, negotiate with experienced prosecutors, and – if necessary – defend you at trial.
Unlike other criminal defense attorneys who focus primarily on their relationship with judges and prosecutors, our loyalty is to you and getting you the best outcome. We’re available 24/7, and we don’t take every case that walks through the door – we only work with clients we believe we can truly help. If you’re worried about your tax return, if you’ve received an IRS notice, or if agents have contacted you, call us immediately. The decisions you make in the next few days can determine whether you face civil penalties or federal prison.