Question

David filed a tax return that later the IRS determined had an underpayment of tax due to fraud. What is the penalty for fraud?
There is a $2,500 penalty imposed for fraudulent returns.
There is a $5,000 penalty imposed for fraudulent returns.
20% of the underpayment attributable to fraud.
75% of the underpayment attributable to fraud.

Answer 1

75% of the underpayment attributable to fraud.

(IRC §6663 — the civil fraud penalty is 75% of the tax underpayment due to fraud. The 20% figure is for accuracy-related penalties, and criminal penalties/fines are separate.)