What are the penalties for a tax fraud conviction?

On Behalf of | Oct 2, 2023 | Tax Crimes

Working adults in Connecticut have to file a tax return each year with both the federal government and the state. The Internal Revenue Service (IRS) receives and analyzes federal tax returns, while the Connecticut State Department of Revenue Services reviews state income tax returns.

Those required to pay taxes often do their best to minimize the total amount they must submit to the government each year. Certain practices, like making strategic charitable contributions and claiming credits for dependents, are completely legal. Other common practices, like exaggerating the number of dependents or failing to report certain income, could lead to allegations of tax fraud. The following are penalties that someone convicted of a tax fraud offense would likely face.

Connecticut tax fraud penalties

Connecticut state law authorizes the government to charge someone with tax fraud or tax evasion for trying to avoid paying required taxes through misrepresentation. The best-case scenario would be a basic fraud charge, which might lead to a penalty that could be as much as the amount of tax not paid, effectively doubling what someone has to pay, along with a $1,000 fine. In scenarios where the state alleges that someone willfully did not pay taxes, file returns or submit accurate documentation, the state could find someone as much as $5,000 and incarcerate them for up to 5 years. These rules do not apply to mistakes but rather only to intentional fraud.

Federal tax penalties

The IRS has very strict rules regarding taxes that allow federal prosecutors to bring federal charges against those accused of fraudulent tax behavior. For individuals, the penalties can include up to $100,000 in fines and up to 5 years in prison. The person will have to pay for court costs, and they will also need to pay not just the taxes that they failed to pay due to fraud but an additional 75% of that amount.

Overall, conviction for tax fraud can be incredibly expensive and can also lead to someone having a lifelong criminal record. Seeking legal guidance to more fully understand the risks involved when facing tax fraud charges brought by the federal government or the state of Connecticut may help people better respond to those accusations.