Tax Evasion Charges

Tax laws are constantly changing, and both the tax codes and criminal statutes in both state and federal law can be among the most confusing areas of the law. As most of us are not tax professionals, it is reasonable to expect that we might make some mistakes in filing our taxes, even if we tried to be as careful as possible. The concern for many people is: can those mistakes lead to criminal charges, known as “tax evasion”?

In the most basic terms, tax evasion means intentionally avoiding paying the taxes you owe. The keyword used in both state and federal tax law which makes the act a crime is “fraud”. Committing fraud is not merely an honest mistake, or even a mistake due to negligence. An act is fraudulent when it involves the willful and intentional use of deception for one’s financial or personal gain.  

While this should provide some relief to people concerned that they may have overlooked parts of their tax filings, there are cases where people can be met with tax evasion investigations or charges due to mistakes that the government suspects were fraudulent. Whether you are facing these charges in state or federal court, the burden of proof is on the government to show that your actions were done knowingly and intentionally to evade taxes. The penalties for conviction are steep, so if you are facing such charges, you will need the help of an experienced white-collar defense attorney.

cartoon of hand handcuffed to dollar bill, symbolic of tax evasion charges

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Tax Evasion in North Carolina

Tax evasion charges in North Carolina fall under the state’s tax statute, N.C.G.S § 105. Under its section on tax evasion penalties, it states:

A taxpayer who, because of fraud with intent to evade tax, underpays the tax under this Article on assets attributable to it under this section is guilty of a Class H felony.

In addition to a serious felony conviction, there are also steep financial penalties for both the unpaid taxes and fraud penalties. Penalties and interest for unpaid taxes include 5 percent of the unpaid tax per month, a 10 percent late payment penalty, and a 20 percent collection assistance fee if taxes are not paid within 90 days. Penalties for fraud and evasion of taxes include a 50 percent fraud penalty on top of any other penalties and interest for unpaid taxes.

The same statute also lists steeper tax evasion penalties for income tax preparers, who are people who prepare taxes for others for compensation in return. The penalties are as follows:

  • If an income tax preparer commits tax evasion and the amount of all taxes fraudulently evaded on returns they filed is $100,000 or more, they will be guilty of a class C felony.
  • If an income tax preparer commits tax evasion and the amount of all taxes fraudulently evaded on returns they filed less than $100,000, they will be guilty of a class F felony.

Federal Tax Evasion

Federal tax evasion works the same way as state tax evasion, but is in relation to federal taxes. It is defined, under 26 U.S.C. § 7201,  as a situation in which:

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any person who willfully attempts in any manner to evade or defeat any tax.

The crime is considered a felony, and it comes with a pelanty of up to $100,00 for an individual, and a term of imprisonment up to 5 years. For corporations, the fine can be up to $500,000.

There are two kinds of federal tax evasion:

  • Evasion of Assessment: An attempt to prevent the government from determining a taxpayer’s true tax liability.
  • Evasion of Payment: An attempt to evade the payment of that tax liability.

The distinction generally comes down to whether or not the tax has become due. For example, if you attempt to move funds to an offshore account to be taxed at a lower tax bracket, you would be guilty of evasion of assessment. On the other hand, if you transfer money to that offshore account to conceal that you have the assets to pay the taxes you owe, you would be guilty of evasion of payment. Both of these crimes constitute tax evasion and either one of them can lead to a conviction and penalties.

Defending Tax Evasion Charges

If you are facing tax evasion charges, it is extremely important to have an experienced criminal defense lawyer on your side. As we mentioned, this crime can be considered either a state or a federal offense, so having a lawyer experienced in both areas of the law can be crucial to your defense.

As stated earlier, the government has the burden of proof to show that your actions were not just mistakes, but with willful intent to deceive the government and pay less taxes. This may make the defense seem easy, but it is not as simple as claiming you did not intend to deceive the government. There are many potential actions you could have engaged in that can show intent, such as:

  • Concealing bank accounts, especially those offshore
  • Consistently overstating deductions
  • Filing a false tax return, amended return, or failing to file a return
  • Making false statements to treasury agents
  • Misrepresenting payments as gifts
  • Pattern of concealing sources of income

All of the above give us reason to strongly recommend that you hire an experienced attorney as soon as possible, as any actions or statements you make can be used against you to assert that you committed fraud.

Request a Consultation with Tarlton | Polk White-Collar Defense Attorneys

Our lawyers have successfully represented clients in fraud cases at state and federal levels and know how to carefully structure a defense based on the facts of the case. Most importantly, we are exceptionally skilled at taking these cases to trial, as we know the tactics used white collar criminal prosecution that often push the defendant into a plea-bargaining position before a trial begins. If you would like to learn more about how we an help, or request a consultation with us, then leave us a message or call us today.