Question

Lisa Sizemore, a taxpayer in the 10 percent tax bracket, purchased stock as an invest- ment on July 11, 2016. She sold the stock on July 9, 2017, 3 days before qualifying for the long-term holding period. If Lisa had waited until July 12, 2017 to sell the stock, she would have qualified for the 0 percent capital gains tax rate. Instead, the sale will now be taxed at ordinary income rates. Upon realizing this, Lisa has told you that she will “fudge”the sale date to July 12. She says to you,“What’s the big deal? It’s just 3 days.” What would you say to Lisa?

Answer 1

I would advise Lisa not to fudge up any dates. I would advise her to calculate the tax and pay it to the governement. There are several reasons why you should not lie on yoour returns

1. IRS can find ot you falsified data on your return. IRS has access to the trades, banks, employers and third parties and can find out that you lied while filing the return. IRS can flag you for mismatch of data and send you a notice.

2. You can get audited by IRS. IRS audit is a very extensive invetsigation. It is a time consuming and costly process as you may hve to hire a professional to represnt you who charge a lot and although chances of getting an audit from IRS is low, it is not worth lying on the tax returns just to save money today you migt have to spend tomorrow. and may be more than what you had to shell out today. Once IRS calls for an audit it can look into your returs for past 6 years. If they find issues, you may be levied more penalities and fines.

3. There is a late payment penalty if the taxes are not paid by the due date precribed by IRS. There is a huge fine for falsifying information on return which can go up to $250,000. You might end up losing tax credit for future years for atleast 2 years. This can be extended upto 10 years.

4. Tax fraud is a felony and punishable by up to 5 years of imprisonment. If frauds are detedcted during IRS audit, it can lead to criminal investigations and charges.

4. You ma not be able to get a mortgage or loan from financial instuitutions if you understate your income. Banks might get a view that you might not be able to repay your loan and ence might not sanction you loans based on the returns you have filed.