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I have had a Google AdSense account for a while. In 2013, Google started requiring to fill out tax information. I was an idiot and decided to claim that I lived in another country and that I had no activity in the U.S. to avoid having to pay taxes on that income. It was not much money so I assumed it wouldn't be a big deal.

Over the years that income started to become significant and I became concerned. Last week I decided to properly fill out my W-9 and to start reporting that income.

I did the math and I should have paid a total of $3,200 in taxes from this income between now and 2013 (25% tax bracket every year plus 15.3% self-employment tax).

Yes, I understand that I'm an idiot, that I did a horrible thing, and that I can get in a lot of trouble. I also understand that I should amend my taxes for those years, but let's assume I just let it go.

In how much trouble can I get exactly if the IRS finds out? I understand that there's a 6 year statute of limitations on criminal charges and no limitation at all on fraud. Is this considered fraud? I'm assuming not.

Practically speaking, would the IRS go all the way and file criminal charges considering the amount of money I owe? Assuming the statute of limitations clock started ticking last week, how much would I have to pay in penalties and interest if this gets brought up at the very last minute of the 6 year mark? Practically speaking, what's the worst case scenario?

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    Tax avoidance is a criminal violation, not just civil. How far they go depends on how much they want to use you as an example to discourage others; punishing fines and/or jail time are not impossible. And if your name really is Marc B., you've just documented that you are aware that you did something wrong and are considering trying to hide it... Voluntarily confessing and paying up strikes me as a far better bet. Then again, I would never have considered getting into this situation in the first place; risk always exceeded grain. – keshlam Apr 25 '16 at 21:55
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    @keshlam -- tax avoidance is okay. Tax evasion isn't. – Pete Becker Apr 25 '16 at 23:08
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    @PeteBecker can you elaborate on tax avoidance? I'd love to avoid paying all my taxes. – NuWin Apr 25 '16 at 23:26
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    @NuWin: Simple. If it is legal then it is called tax avoidance. If it is illegal then it is called tax evasion. – gnasher729 Apr 25 '16 at 23:29
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    @ChrisInEdmonton it seems that in this case the OP does owe money, and I would argue that if he's willing to amend the returns and pay the taxes - he doesn't need a lawyer. – littleadv Apr 26 '16 at 8:44
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In how much trouble can I get exactly if the IRS finds out? I understand that there's a 6 year statute of limitations on criminal charges and no limitation at all on fraud. Is this considered fraud? I'm assuming not.

There's no statute of limitations for fraud (which is a criminal charge). The statute of limitations is for failure to report income which is not fraud. In your case, since you willingly decided to not report it knowingly that you should, it can most definitely account for fraud, so I wouldn't count on statute of limitations in this case.

I should amend my taxes for those years

That would be the easiest way to go.

would the IRS go all the way and file criminal charges considering the amount of money I owe

They have the legal right to, and if you do get caught - likely they will. Easy money for them, since you obviously have income and can pay all the fines and penalties.

Practically speaking, what's the worst case scenario?

Theoretically - can be jail as well.

Being charged in a criminal court, even if the eventual punishment is just a penalty, is a punishment of its own. You'll have troubles finding jobs, passing security checks, getting loans approved, etc.

For $3200, when you're in 25% bracket as an individual for years, I'd say not worth it.

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  • An off topic nit, but there is a statute of limitations for fraud in the US. I believe only murder has no statute of limitations. – gaefan Apr 26 '16 at 13:27
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    @Kekito not tax fraud, no. See IRC Sec. 6501(c) – littleadv Apr 26 '16 at 13:37
  • Interesting. Nothing stands between the government and its money! – gaefan Apr 26 '16 at 14:02
  • @littleadv "For $3200, when you're in 25% bracket as an individual for years, I'd say not worth it." what's not worth it? – CodyBugstein Jan 7 '18 at 0:32

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