Have you ever been looking over your taxes, thinking, “I have no idea what all this means?” You are not alone, and if you have made a mistake when filing taxes, you are not the only one.
Making an honest mistake on your taxes is not a crime. You don’t have a degree specializing you in taxation. However, it is a severe crime if you deliberately under-report revenue or claim
deductions that you are not entitled to and that is known as tax evasion.
Tax Evasion Explained
Congress, in 26 U.S.C. § 7201, defines tax evasion as:
Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation, or imprisoned not more than 5 years, or both, together with the costs of prosecution.
Under this code, there are two types of tax evasion, (1) evasion of assessment and, (2) evasion of payment. The distinction is whether or not the tax has become due. For instance, 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 an offshore account to
conceal that you have the assets to pay the taxes you owe, you would be guilty of evasion of payment.
Consequences of Evading Taxes
Anyone found guilty of tax evasion can be made to pay the cost of trial, fined up to $100,000 ($500,000 in the case of a corporation), and up to 5 years in prison.
Simply put, tax evasion is intentionally not paying your taxes, not reporting income, or reporting fraudulent deductions. Further, most people believe it only refers to income tax evasion, but it can also be applied to business sales and employment taxation. Pay your taxes. Don’t try to beat the system. Everyone makes mistakes and the IRS knows that, but if they have accused you of tax evasion, give our office a call and we can help you sort out the best method for attacking your case.