Tax evasion is illegally avoiding paying taxes, failing to report, or
reporting inaccurately. The most common one is failing to report cash income.
The government imposes strict and serious penalties for tax evasion.
Tax evasion is different from tax avoidance, which is making use of legal
methods to minimize tax due. There are many deductions you can legally claim to
reduce your tax liability, for example if you have dependents (the more
dependents, the lower your taxes), if you have certain medical expenses or if
you contribute to certain retirement plans or to charitable organizations.
Taking
advantage of them and keeping your tax bill to a minimum is quite legal and if
you do that you are guilty of no crime. However, when companies, individuals, or
any other legal entities intentionally avoid their legal responsibility, that is
tax evasion and the penalties are severe, including prison terms and hefty
fines.
The Internal Revenue Service (IRS) oversees the regulation of taxes. It also
prosecutes any person or entity that avoids payment of taxes due, and can assess
penalties.
The IRS has nearly 3000 special agents who are trained to gather the
information used to detect tax evasion. They have access to tax returns, the
power to issue a summons for access to further financial information, and the
right to seize or freeze monies in the attempt to collect the necessary
financial information.
The IRS audits some taxpayers at random each year, but most audits are a
result of unusual activity. If a person claims a lot of deductions in proportion
to their income, or if a person with a lot of assets declares a very small
income, an audit may result.
If it is established that taxes have been intentionally evaded, the IRS can
levy tax liens, seize assets, freeze money in check and savings accounts, and
garnish wages. Any and all properties held by the individual taxpayer can be
seized and sold at auction if no attempt is made to repay the liability.
Everyone that is determined to be involved in an evasion of tax liability has
the right to meet with the IRS and be heard. Should you find yourself in this
situation, it would be wise to engage a tax attorney.
There are three crimes with which an individual may be charged:
* Tax evasion: This is a felony and a conviction can carry a prison sentence
of up to five years and/or fines up to $100,000.
* Filing a false return: The government does not have to prove the taxpayer
intended to evade tax laws, just that the taxpayer filed a false return. This is
a felony and can result in a prison sentence of up to three years and/or fines
up to $100,000.
* Failing to file a tax return: This is a misdemeanor and can result in a
maximum prison sentence of one year and/or fines totaling up to $25,000 for each
year for which no return was filed. Many individual taxpayers rely on
accountants and business managers to handle their financial affairs and may not
be aware of the status of their finances.
However, the individual taxpayer is responsible for the information provided
to the IRS. Do yourself a favor and examine your return, understand what you're
reading, and check that it is accurate.
