we are dealing with this with katherine too.... we are trying to teach her what telling the truth is and what lying is and that Jesus wants us to always tell the truth.
We are also making sure to punish lying severely, but if she tells the truth (like if she admits to hitting her brother), then we talk about it but we do not give her spanks or time out like we would if she lied about it because we want to encourage her to be honest with us even if she did something bad...
When we were teaching this to Trevor, we never used the word lying since he didn't know what that meant. We said, "You need to tell me what's true." Of course as he's gotten older we've introduced the actual term.
I seem to remember when he was younger (late 2's?) he went through a phase of this...testing boundaries...then it went back to 'normal' and we've been fine ever since.
Stay on it, mama! You're doing a great job!