According to the Statistic Brain Research Institute, 1.6 million people cheat on their tax returns every year, resulting in $270 billion in lost revenue to the Internal Revenue Service (IRS). While taxpayers are allowed to use lawful tax planning strategies to reduce their tax burden, outright dishonesty—such as misrepresenting income or inflating deductions—can result in criminal charges. Understanding where legal tax planning ends and criminal conduct begins is critical.
Because the IRS loses billions each year due to false tax returns, it has a strong incentive to pursue individuals who submit fraudulent filings. What can you do to ensure you are doing the right thing on your tax return?
You are responsible for what you submit to the IRS
A felony conviction for tax evasion or tax fraud can carry penalties of more than a year in prison and hundreds of thousands of dollars in fines. While the idea of criminal charges is daunting, it is important to remember that the IRS does not usually pursue criminal penalties for simple mistakes. Instead, charges typically require negligence or willful action intended to deceive the IRS.
That said, you remain responsible for the accuracy of their returns—even if they relied on a tax preparer. Many high-profile prosecutions began with the claim that someone else handled the paperwork, as discussed in cases involving preparer-related errors.
It is also important to remember that while the IRS may not immediately pursue criminal penalties for simple mistakes, many criminal cases begin with a routine civil audit. What starts as a request for documentation can quickly escalate if investigators believe false information was intentionally provided. This pattern has appeared repeatedly in major prosecutions, including the largest tax evasion cases pursued by the government.
Why people cheat and what can be done to prevent it
As tax attorneys, it is not only our goal to understand the tax code, but also to understand why people violate it. According to The Washington Post, there are six common reasons people cheat on their taxes, including:
- They think they can get away with it
- They believe the IRS will not help them resolve tax problems
- They assume everyone else is doing it
- They distrust the government
- They do not understand the tax code
- They do not want to pay taxes on 1099 income
Unfortunately, these assumptions often prove costly. Increased enforcement efforts, whistleblower incentives, and data sharing have made detection far more likely. Many recent prosecutions have been aided by third-party disclosures, as explained in how whistleblowers can trigger tax investigations.
It does not take a lawyer to tell you that lying on a tax return is a bad idea. However, it often takes experienced legal counsel to advise individuals and businesses on complex tax, business, and international reporting obligations—particularly in an era of aggressive enforcement and evolving tax laws.
At Goldburd McCone LLP, we help individuals and business owners understand their obligations and develop compliant tax planning strategies. We are here to guide you when the IRS cannot, because we have the resources and time to focus on your specific situation. The consequences of tax fraud and tax evasion are too severe to ignore—seeking legal guidance early can make a meaningful difference.