Question

10. Billy Jean filed her 2011 return in a timely manner but fraudulently omitted several items of income. Subsequently, she amended the return, including the omitted income, and paid the additional tax and interest. May the IRS assess a civil fraud penalty? Explain.

Answer 1

Here, it is given that person BJ filed her return in a timely manner but fraudulently omitted several items of income. Subsequently, she made changes/corrections in the return, including the omitted income, and paid the additional tax and interest.

IRS can assess a civil fraud penalty there is a clear evidence of underpayment of tax due to fraud. The evidence provided must clearly show the taxpayers intention to evade the assessment of the tax.

In this case as person BJ made changes/corrections in the return, including the omitted income, and paid the additional tax and interest, IRS may not assess a civil fraud penalty on person BJ.