Have a Tax Question? Ask a Tax Expert
Generally there would not be a separate penalty for filing with the wrong status. What would happen is that if the IRS requires you to adjust your filing status, or if you file an amended return on your own to correct the error, then you would owe penalties and interest on any additional taxes that were due as a result of the change. The penalty would be equal to one half of one percent every month that the tax is underpaid, not to exceed a total of 25% of the additional taxes due. Interest is compounded daily and the interest rate is changed quarterly, but is generally running around 4 to 5% per year.
Thank you bnd
Hello again bnd,
If you received a refund of $9,000 when your actual refund should have only been $500 had you used the correct filing status of married, then if you now file an amended return to correct that filing status, the IRS would make you pay back the $8,500 which you over-refunded. So you would owe back the actual difference in taxes plus penalties and interest on that amount.
This type of situation generally does not result in criminal charges, but rather civil penalties, which is the penalties and interest that I talked about earlier that would be applied to the taxes you were required to pay back to the IRS. The IRS really does not normally pursue criminal charges unless there is a higher dollar amount involved or if the taxpayer refuses to cooperate in paying back the taxes which are due. If the IRS were to audit your return and find the error, or if you were to file an amended return on your own, in either case if you make arrangements to pay back the amount you owe, then it is highly unlikely they would pursue any criminal charges against you. But you would have to pay back the taxes along with any penalties and interest which may apply due to the changes.
The dollar amount can make a difference in whether or not the IRS would pursue criminal charges. The IRS's main concern is that they collect any tax monies that they are due. They really have no interest in prosecuting taxpayers who willingly make these payments. However in a case where a taxpayer has underreported his income or not reported income at all, and may owe hundreds of thousands in tax dollars, the IRS tends to pursue criminal charges, if nothing else to set a precedent so that others do not try to follow that same path.
If you will remember about 10 years ago there was the famous case where Leona Helmsley, the multi millionaire hotel guru, was criminally charged with tax fraud and spent time in jail. She certainly had the money to pay the taxes and penalties that she owed, but the IRS filed criminal charges against her anyway, simply because of the high amount she owed and her obvious blatant disregard for the tax laws. If the IRS did not pursue criminal charges in those types of cases, it would leave the door open for many millionaires to do the same thing, which the IRS cannot afford to encourage.
The IRS can always file criminal charges if they feel that tax fraud was involved, but the reality is that they do not pursue criminal charges in cases such as yours, as long as you willingly pay the additional taxes that may be due.