What is the civil fraud penalty from the IRS?

The civil fraud penalty under IRC Section 6663 is 75% of the underpayment of tax attributable to fraud. This is one of the most severe civil penalties the IRS imposes, and it replaces (not adds to) the accuracy-related penalty. For example, if the IRS determines you fraudulently underreported income by $100,000, resulting in $30,000 in additional tax, the civil fraud penalty would be $22,500 (75% of $30,000). The IRS must prove fraud by 'clear and convincing evidence,' which is a higher standard than the preponderance of evidence used for other penalties but lower than the 'beyond a reasonable doubt' standard for criminal fraud. Indicators of fraud include: understatement of income, fictitious or overstated deductions, two sets of books, failure to file returns with intent to evade, concealment of assets, and failure to cooperate with IRS examination. There is no statute of limitations on assessment for fraudulent returns. If you're facing a civil fraud penalty, professional representation by a tax attorney is essential, as the case could also be referred for criminal investigation.