Tax Evasion

Tax Evasion applies to individuals and businesses alike and involves the taxpayer intentionally overstating their tax deductions and claimed exemptions, as well as the process of intentionally falsifying or failing to file their tax returns.  If found liable for back taxes as a result of tax evasion, the punishment imposed is significant and can include both criminal and civil penalties, depending on the circumstances and severity of the tax evasion.  Tax evasion is a form of tax fraud, along with attempt to defeat taxation, tax avoidance, and willful failure to pay income tax.

Federal Tax Evasion

Federal tax evasion is considered fraud and occurs when business or individuals willfully and intentionally mislead the IRS by failing to file their income tax return or falsifying their tax returns.  Federal tax evasion can involve the omission of wages earned, as well as the overstatement and improper application of deductions and exemptions.  The overall premise behind federal tax evasion is the taxpayer knows that they should be paying a certain tax, but they intentionally defraud the government by trying to hide asserts, cover up earnings, lie about expenses and overstate their losses.  A mistake on an income tax return does not qualify as federal tax evasion – the action must have been done intentionally or knowingly in order to be considered fraudulent.  If an individual is found to have the intent to defraud the IRS, the taxpayer will be subject to civil and criminal penalties and fines and possible imprisonment.

Tax Evasion Penalties

Tax Evasion is taken very seriously by the IRS, and as such, the penalties are significant.  In addition to the immediate cost and repercussions of tax evasion, there are also long-lasting effects on individuals and businesses alike.  The penalties for tax evasion can include both criminal and civil penalties by way of fines, the unpaid tax amount plus interest that compounds daily.  The criminal consequences occur after formal criminal charges are filed against an individual or business, so long as the charges are filed within 6 years.  Additionally, tax evasion perpetrated by businesses and individuals may be held liable for up to $25,000 per year of unpaid taxes, as well as imprisonment for one year for each year of fraudulent non-filing.

Reporting and Investigation of Tax Evasion

Businesses and corporations can also be found guilty of tax evasion if the IRS can show that the business engaged in willful conduct that led to falsifying documents in order to intentionally defraud the government.  If the IRS suspects that a business is engaged in criminal fraudulent activity, they will initiate an investigation with their Criminal Investigations Unit.  The Criminal Investigations Unit is the enforcement branch of the IRS, and is responsible for conducting investigations to determine if there is evidence suggesting that taxpayers acted willfully, knowingly and intentionally to violate IRS tax laws.  If such conduct is found to have a legitimate basis, the matter will be elevated to the Federal Tax Court and litigated during a trial.  If the Investigations Unit cannot find a basis for the suspicion, the case will not be escalated and the investigation will be closed. 

Legal Help for Tax Evasion

An attorney who specializes in tax evasion cases and who deals regularly with the IRS can be extremely helpful in negotiating a settlement agreement with the IRS in the event that the taxes were properly owed.  In the event that the tax evasion charges are without merit, and attorney can help advocate your case and take steps to prevent the IRS from pursuing groundless claims.