Negligence vs fraud — what's the difference?

Intent. Negligence is carelessness at 20%; fraud is intentional wrongdoing at 75% — and the IRS must prove it.

Can the IRS go back forever on fraud?

For assessment, yes — a false or fraudulent return filed with intent to evade has no limitations period.

Should I talk to the agent if fraud is possible?

No — get counsel first. Anything said in a civil exam can feed a criminal referral.

IRC §6663 · 26 U.S.C. §6663

IRC §6663: Civil Fraud Penalty

By Paul D. Diaz, EA, MBA · Updated September 20, 2026

IRC §6663 imposes a 75% civil fraud penalty on underpayments attributable to fraud — with the burden on the IRS to prove it by clear and convincing evidence. Fraud also lifts the assessment statute indefinitely. This is the line where tax practice becomes attorney territory.

What it governs

Badges of fraud: double books, false documents, concealment, cash
Burden on the IRS: clear and convincing evidence
No limitations period for false or fraudulent returns
Criminal referral is a separate track (IRS Criminal Investigation)

In the GuideFull treatment in Chapter 18 of the Guide — THE TAX CUTTERY® Guide to Federal Income Taxation, Professional Edition (564 pages, 24 chapters).

From the practiceFraud means attorney territory: the credentials →

Questions this section answers

Negligence vs fraud — what's the difference?: Intent. Negligence is carelessness at 20%; fraud is intentional wrongdoing at 75% — and the IRS must prove it.
Can the IRS go back forever on fraud?: For assessment, yes — a false or fraudulent return filed with intent to evade has no limitations period.
Should I talk to the agent if fraud is possible?: No — get counsel first. Anything said in a civil exam can feed a criminal referral.

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