"government may now have to prove that he or she knew the statement was unlawful — not just that it was false. That requires a state-of-mind element that can be hard to nail down. Defendants often claim they were unaware that lying to the government was illegal, especially in casual conversations or when not under oath."
Except as otherwise provided in this section, whoever, in any matter within the jurisdiction of the executive, legislative, or judicial branch of the Government of the United States, knowingly and willfully— (1) falsifies, conceals, or covers up by any trick, scheme, or device a material fact; (2) makes any materially false, fictitious, or fraudulent statement or representation; or (3) makes or uses any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry (18 USC §1001).
Upon notification of an IRS tax audit, consideration of False Statement aspects should be included in your audit strategy. Not only because there is such a low can threshold for the allegation, i.e., the government can make its case much easier than proving tax evasion, but also because as a policy, the IRS and government want to promote full compliance with their demand. Therefore, any efforts not to fully comply with agents’ demands and questions are taken very seriously. Because of this, it is not uncommon for statements made during audits to come back to haunt the taxpayer in the form of a criminal case and/or needless civil (money) penalties being imposed. For examples see our link to False and Misleading Statements and audits.
On the other end of the spectrum, you should not be intimidated by the Internal Revenue Service, nor should you feel like you need to pay more tax than you are legally required to pay. Think of a tax audit as a gateway for the government to find tax problems and other crimes that can expand through multiple years and spiral out to connected people and entities. Audit representation by a tax law firm experienced in representing taxpayers who are being audited, especially from the very beginning of the audit, can make all the difference because a tax attorney can contain or even reduce the scope of the tax audit.