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Federal Tax Evasion Charges

Federal tax evasion is a serious crime involving the avoidance of federal taxation by individuals and/or corporations. There are two different components of the crime as laid out in the Internal Revenue Code within the greater U.S. Code (Title 26, Section 7201):

  • The offense of evading a just tax assessment as levied by the IRS
  • The offense of evading or seeking to defeat payment of a just tax as administered by the IRS

Is Tax Evasion a Federal Crime?

Yes, federal tax evasion constitutes a federal crime. Investigation of a potential federal tax evasion offense typically begins with an audit of a filed tax return that IRS officials, or other governmental agents, may find suspicious for one reason or another.

Unreported income, as well as suspicious behavior during an audit, are just two elements of fraud that the Internal Revenue Service looks for when scrutinizing potential tax evasion.

Contrary to common belief, indictments in response to instances of federal tax evasion are relatively rare. In 2015, the IRS secured just 1,330 indictments out of a base of over 150 million taxpayers on charges of federal tax evasion.

Is Federal Tax Evasion a Felony?

Yes, federal tax evasion is considered a felony offense in all instances. Given that the federal government is fully entitled, by established precedent and written law, to pursue federal charges against any U.S. taxpayer considered to be evading or defeating just taxation, state governments or municipal jurisdictions are not able to pursue charges at this level.

Federal Tax Evasion Penalties

Criminal penalties for the offense of federal tax evasion can be a fine of up to $100,000 ($500,000 in the case of the offender being a corporation) as well as a prison sentence of up to five years. Additionally, you may be ordered to cover the costs of prosecuting the case.

State Tax Evasion

Individual states may levy their own income taxes separately from those levied by the federal government, and those in violation of state income tax statutes may face state-level charges in addition to any federal charges, concurrently.

In New York, for example, failure to pay due taxes, submission of a fraudulent tax return, or scheming to cheat the state tax apparatus through misrepresentation all fall under the charge of tax fraud. The punishment for tax fraud in New York ranges from one to 25 years imprisonment, depending on the circumstances and severity of the offense.

Texas, by contrast, does not levy a state income tax upon its residents, only businesses that operate within its borders. The penalty for tax fraud in Texas ranges from monetary fines and the restriction of business licenses to a lengthy prison sentence. Businesses that defraud the government of less than $1,500 in collected sales taxes face misdemeanor charges, while those which defraud the government of more than $1,500 face felony criminal charges.

As an example, a business that fails to remit collected sales taxes to the state comptroller in an amount greater than $200,000 may face first-degree felony charges with a potential punishment of between five to 99 years imprisonment upon conviction.

When to Consult a Federal Tax Evasion Attorney

If there is a legitimate case for tax evasion, an attorney should be contacted immediately. A conviction for federal tax evasion requires proof of three things:

  • The existence of a tax deficiency
  • Willfulness in the evasion of paying the tax
  • An act intended to mislead the government or hide funds to avoid paying taxes

If these three conditions are met, there is a high likelihood that you could be punished for tax evasion. Federal tax evasion is a serious offense and repeated offenses can result in a felony conviction, which will remain on your permanent record. If you have been accused of federal tax evasion, search for an experienced attorney in your area today.

Do I Need a Federal Tax Evasion Attorney?

Under federal law, it is illegal to pay less tax than the law mandates and anyone convicted of federal tax evasion will be subject to a prison sentence, a fine or both. Although the failure to file a federal tax return one time is a misdemeanor, if you fail to file for several years, you can be charged with a felony. If you have been charged with federal tax evasion, it is important to speak to an experienced attorney who has a good understanding of federal tax evasion laws.

How a Tax Attorney Can Help

Securing professional legal counsel, particularly an attorney who is highly skilled and specialized in defending charges related to financial offenses, can increase your chances of arguing a successful case in court and possibly avoiding conviction.

Several defenses are available to defense attorneys handling a case involving federal tax evasion. One such defensive strategy centers around a lack of willful fraud, or, in other words, arguing that the defendant did not knowingly or willfully under-report their income to the IRS. A lack of intent in terms of any alleged defrauding may be enough to mount a viable defense.

Additionally, attorneys familiar with tax evasion cases may have the ability to determine whether or not you actually owe the IRS the stated figure. Unclaimed expenses or other avenues to reduce the total tax debt owing may be one option available to certain clients.

Given that federal tax evasion charges are usually felonies, you should not take such charges lightly.

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