What Is Tax Evasion?

Dealing with your annual income tax return can be frustrating. The tax laws change every year, and it is hard to know what is covered and what you should include. But making a mistake on your tax return can come with penalties for underpayment. However, intentional tax evasion is much more serious and could involve criminal penalties.

If you are being investigated for tax evasion by the IRS, contact an experienced federal criminal defense attorney for legal advice.

Tax Evasion Laws

This tax year, don’t find yourself unprepared to file your federal income tax return. Failing to pay your yearly taxes can cause problems down the road. Trying to avoid paying your taxes can be a federal crime, with potential criminal charges and civil penalties.

You can face a felony criminal charge for tax evasion if you willfully choose to avoid filing your yearly income tax return.

To be convicted of tax evasion, the government has to prove the following beyond a reasonable doubt:

• You owed more in taxes than you declared on your income tax return
• You knew you owed more in taxes than what you declared
• You willingly attempted or successfully evaded or “defeated” the additional taxes

Who Can Be Charged With Tax Evasion?

Tax evasion charges are not just for individual taxpayers. Tax evasion charges can apply to:

• Tax preparers
• Accountants
• Bookkeepers
• Corporate officers
• Executors of estates

What Are Examples of Tax Evasion?

Examples of evading taxes include:

• Failing to disclose taxable income from a side business
• Failing to report income received from the sale of a business
• Concealing your assets in offshore accounts and underreporting your taxable income
• Failing to file your income tax form
• Using a bank account under a false name

You don’t want tax authorities auditing your financial records. If the IRS is seeking a tax audit, get legal advice from an experienced tax fraud attorney as soon as possible.

What Is the Difference Between Tax Evasion and Tax Avoidance?

Tax evasion is a type of tax fraud. Tax evasion involves a willful failure to avoid payment or assessment of taxes owed. Tax fraud includes other types of attempts to avoid paying taxes, including:

• Failing to report income
• Failing to file taxes
• Creating false invoices or records
• Not reporting illegal income

Alternatively, tax avoidance is legal. Tax avoidance involves using legal tax credits and deductions under the Internal Revenue Code to reduce your tax liability.

What Are the Criminal Penalties for Tax Evasion?

Tax evasion is a federal crime. The penalties for a conviction of tax evasion include:

• Up to five years in federal prison
• Fines of up to $100,000 for individuals
• Fines of up to $500,000 for corporations
• Attorney fees, court costs, civil penalties, and restitution for the unpaid taxes

Are There Civil Penalties for Tax Evasion?

If you choose not to pay your taxes, you can face more than just having to pay your overdue tax bill. You may be subject to an IRS audit and have to pay an additional civil fine and penalties, including:

• Failure to file penalties
• Late filing penalties
• Interest on any unpaid taxes

The failure to pay penalty is 0.5% of the unpaid taxes for each month unpaid, up to a maximum of 25% of unpaid taxes. The failure to file penalty is 5% of the unpaid taxes for each month, up to a maximum of 25% of unpaid taxes. The IRS can also impose a tax fraud penalty of up to 75% of the unpaid taxes.

Legal Defenses for Tax Evasion

If you find yourself subject to a criminal charge for a tax crime or facing an IRS audit, make sure you seek legal advice from an experienced tax fraud attorney. Your attorney can help you understand what your best defense to tax evasion charges. Legal defenses can include:

• A lack of intent to commit tax evasion
• A lack of evidence to support any of the elements of the criminal charge
• That you relied on the advice of others, such as your CPA or tax preparer

Take any criminal investigation or IRS audit extremely seriously. Having a lawyer in your corner can level the playing field against aggressive government investigators who will ask you questions about the tax code that you may not understand. Talk to an experienced tax attorney for legal advice about any tax disputes with the IRS.