• The IRS can penalize people it finds have committed a tax crime.tax forms image by Chad McDermott from Fotolia.com
  
  The Internal Revenue Service (IRS) conducts audits of individuals it suspects may have submitted fraudulent information on a tax return. If IRS authorities find evidence that the person has committed a crime, they can assess penalties against the person. These penalties vary based on the nature and severity of the crime. Penalties are usually in the form of fines added to the amount of underpayment, but may also includes jail time and other forms of punishment.
  
  

Civil Fraud Penalties

• Civil fraud penalties against the IRS are punished by fines. When an audit reveals that a taxpayer has intentionally placed false or inaccurate information on a tax return, the taxpayer can be charged with a fine of up to 75 percent of the underpayment. If the taxpayer can show the errors were not intentional, fines for inaccuracy (which are often lower) may be assessed instead of fraud charges.
  
  

Criminal Penalties

• Criminal penalties are rare with IRS audits but they do occur. As of July, 2010, intentional attempt to evade or defeat taxation, willful failure to collect or pay tax or attempt to defraud the United States can result in imprisonment of up to five years and fines of up to $250,000 for individuals ($500,000 for corporations). Willful failure to file return, supply information or pay taxes can result in imprisonment of up to one year and fines of up to $100,000 for individuals ($200,000 for corporations). Supplying false statements intentionally (which can be considered perjury) and aiding someone in fraud can both result in imprisonment of up to three years and fines of up to $250,000 for individuals ($500,000 for corporations).
  
  

Deadline Penalties

• Audits that reveal late payments or inaccurate dating can lead to various deadline penalties. As of July, 2010, the penalty for filing late is 5 percent of the net tax due for each month past the due date, with a maximum of 25 percent. Late filing of 60 days or more pass the due date) carries a minimum penalty of $100 or 100 percent of the tax owed, whichever is smaller. Late filing due to fraud carries a penalty of 15 percent per month of the net tax due, with a maximum of 75 percent. Late tax payments carry a penalty of 0.5 percent per month of the unpaid tax due, with a maximum of 25 percent. If the IRS sends a notice of intent to levy, the 0.5 percent will increase to 1 percent.
  
  

Accuracy-Related Penalties

• Inaccurate calculations and statements on a return carry various penalties. Inaccuracies causes by negligence, or disregard of IRS rules, can bring a penalty of 20 percent of the tax underpayment. Substantial understatement of income tax owed (greater than 10 percent of the correct tax liability or more than $5,000) carries a penalty of 20 percent of the tax underpayment. Overvaluing property by 200 percent but less than 400 percent of the correct amount carries a penalty of 20 percent of the tax underpayment. Overvaluing property by more than 400 percent of the correct amount carries a penalty of 40 percent of the tax underpayment. Undervaluing estate or gift tax by 50 percent or more of the correct value carries a penalty of 20 percent of the tax underpayment, 75 percent or more carries a penalty of 40 percent of the tax underpayment.