Hal and Wanda, his wife, are in the 35% marginal tax bracket in the current year. Wanda fraudulently omits from their joint return $50,000 of gross income. Hal does not participate in or know of her fraudulent act. Hal, however, overstates his deductions by $10,000 because of an oversight.
a. If the government successfully proves fraud in a civil suit against Wanda, what fines and/or penalties might she owe? If Hal and Wanda establish that the overstatement is not attributable to fraud, can the government impose a civil fraud penalty on Hal?
b. If the government successfully proves fraud in a criminal suit against Wanda, what fines or penalties might she owe? Could she or Hal be sentenced to prison?