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What is fraudulent tax refund charges?
|Last Updated on: 8th October 2025, 11:35 am
Thanks for visiting Spodek Law Group. We’re a second-generation law firm managed by Todd Spodek – with over 40 years of combined experience. You’ve probably heard about some of the cases we’re famous for handling. Todd represented Anna Delvey, the fake German heiress whose story became a Netflix series. We defended the juror in the Ghislaine Maxwell trial when he faced misconduct allegations. These weren’t easy cases, they were cases other firms called unwinnable.
If you’re reading this, the IRS or federal prosecutors think you filed false returns to get money you weren’t entitled to. That’s what fraudulent tax refund charges are about – filing tax returns with fake information to claim refunds. This article explains the federal charges you’re facing, what prosecutors need to prove, and what sentences look like in 2025.
The Two Main Federal Statutes
Federal prosecutors charge fraudulent tax refund cases under two statutes most of the time. 26 USC 7206 makes it a crime to file any return “which contains or is verified by a written declaration that it is made under the penalties of perjury” that you don’t believe is true. That’s the statute for filing a single false return – maybe you inflated deductions, claimed dependents who don’t exist, or invented business expenses. Maximum penalty is three years in federal prison, though enhanced fines under 18 USC 3571 can reach $250,000 for individuals.
Tax evasion under 26 USC 7201 is more serious. This statute covers willfully attempting to evade or defeat any tax – not just filing false returns, but any affirmative act of evasion. Prosecutors use 7201 when the fraud involves substantial amounts or multiple years. Maximum sentence is five years in federal prison and fines up to $100,000 for individuals.
Stolen identity refund fraud – that’s when you use someone else’s Social Security number to file returns and claim their refunds – gets charged differently. The Justice Department coordinates these prosecutions nationally because SIRF schemes cost the Treasury over $2 billion annually. You’re looking at identity theft charges stacked on top of tax fraud charges, which means mandatory minimum sentences under 18 USC 1028A kick in. Two years mandatory, consecutive to whatever sentence you get for the fraud itself.
What The Government Has To Prove
Willfulness is the element that matters. Federal tax crimes require proof that you knew the law imposed a duty on you and you intentionally violated that duty. The government can’t convict you for mistakes. They need evidence you acted deliberately – emails discussing the fraud, records showing you knew the information was false, patterns across multiple returns.
For 26 USC 7206 charges, prosecutors must prove you subscribed to a return under penalty of perjury that was false regarding income amounts, deductions, or dependent status – and you did not believe it was true.
In tax evasion cases under 7201, the government proves willfulness, a tax deficiency, and an affirmative act of evasion like filing false returns or concealing income. The tax deficiency gets calculated with precision because that number drives your sentence.
How Sentences Get Calculated In 2025
Tax loss controls everything in federal sentencing for these cases. The U.S. Sentencing Guidelines use the amount of loss to the government as the primary factor determining your base offense level. Under Section 2T1.1, tax loss under $6,500 starts at level 6, but the levels increase rapidly – $120,000 to $250,000 is level 16, and losses over $65 million reach level 36.
Recent 2025 cases show how this works. A Colorado defendant who hid $20 million in income causing an $8 million tax loss got a base offense level of 24, which translates to 63-78 months for someone with no criminal history. Four tax preparers in Texas who defrauded the IRS of nearly $8 million received combined sentences of 105 months – one got 57 months, another got 18 months depending on their role. Federal judges sentenced defendants in a multi-state stolen identity scheme to terms ranging from 36 to 46 months in April 2025, plus restitution orders totaling over $90,000.
If prosecutors can’t determine the exact tax loss, IRS Criminal Investigation guidelines allow estimation – 28% of underreported gross income for individuals, plus 100% of any false credits claimed. That estimation method often produces higher loss calculations than defendants expect.
Civil Penalties Versus Criminal Charges
Not every false return becomes a criminal case. The IRS pursues civil penalties for most tax problems – the civil fraud penalty adds 75% of the underpayment, and frivolous return penalties add $5,000. Civil cases don’t require the same proof of willfulness that criminal cases require.
When does the IRS refer cases to Criminal Investigation? Large dollar amounts, repeated violations across multiple years, sophisticated concealment methods, organized fraud rings. Once CI gets involved, you’re facing potential prosecution – about 90% of cases CI investigates result in prosecution recommendations.
You can’t fix a criminal tax case by paying the taxes you owe. Restitution is mandatory on top of prison time. Federal judges order defendants to pay back the full tax loss plus penalties and interest – the government can garnish wages and seize assets for 20 years or more.
Defenses That Actually Work
Lack of willfulness is the defense that matters most. If your return preparer made errors without your knowledge, if you relied on bad advice from an accountant, if you genuinely misunderstood complex tax provisions – those facts can defeat the willfulness element. The challenge is proving your state of mind.
Reliance on professional advice works when you disclosed all relevant facts to your tax advisor and followed their advice in good faith. Courts rejected this defense when defendants concealed information from advisors. If you asked your preparer to inflate deductions, reliance doesn’t help you.
Statute of limitations bars prosecution after six years from the date you filed the return. But if you never filed a return, there’s no limitations period.
Why These Cases Require Experienced Defense
Tax fraud prosecutions are document-intensive cases with complex financial evidence. Former federal prosecutors on our team understand how the government builds these cases because they’ve built them. The calculations determining your tax loss – which drive your sentencing exposure – are often negotiable if you have lawyers who understand the guidelines and can challenge the government’s methodology.
Early intervention matters because once you’re a target of IRS Criminal Investigation, anything you say can be used to prove willfulness. Revenue agents might interview you during what seems like a civil audit, then pass your admissions to CI. If CI already contacted you or executed search warrants, the case is moving fast and prosecutors are building toward indictment.
At Spodek Law Group, we defend federal tax cases throughout the country – from initial CI interviews through trial. Todd Spodek’s father was an attorney, and Todd grew up in the courts learning criminal defense. That second-generation experience means we know how to challenge the government’s evidence and negotiate outcomes that protect your future.
If federal prosecutors or IRS Criminal Investigation contacted you about false tax returns or fraudulent refunds, don’t talk to them without counsel. What you say determines whether you get charged and what evidence the government has to prove willfulness. We’re available 24/7 because these investigations move quickly.