In short
The civil fraud penalty is 75% of the part of an underpayment caused by fraud. The Internal Revenue Service must prove fraud by clear and convincing evidence.
Key takeaways
- Once fraud is shown for part of an underpayment, the whole underpayment is treated as fraudulent unless the taxpayer proves otherwise.
- There is no statute of limitations on assessing tax for a fraudulent return.
- Criminal tax evasion is a separate felony with its own penalties.
Where it's tested
REG: Federal Tax Procedures & Penalties — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
The civil fraud penalty applies at what rate, and who bears the burden of proof?