It shouldn't come as a shock to hear that it's a crime to cheat on your taxes. And the number of convictions for tax crimes has decreased over the past decade. Corporations do most of the rest. Cash-intensive businesses and service industry workers, from handypeople to doctors, are the worst offenders.
Most people cheat by deliberately underreporting income.
If you are caught cheating by an auditor, she can either slap you with civil fines and penalties or worse, refer your case to the IRS' criminal investigation division. Using a false Social Security number, keeping two sets of financial books or claiming a blind spouse as a dependent when you are single are all examples of tax fraud. While auditors are trained to look for fraud, however, they do not routinely suspect it. They know the tax law is complex and expect to find a few errors in every tax return. They will give you the benefit of the doubt most of the time and not go after you for tax fraud.