With all the tax laws, forms to fill out, and receipts to keep, signing tax forms always causes a bit of fear that tax documents could send a filer to jail if they are not filled out properly. But, should it intimidate us when that April 15th deadline approaches? Not if you know the facts about tax evasion and how you can prevent being charged with the crime.
To be clear, tax evasion is not simply owing back taxes. In fact, the IRS would rather you file your taxes and not pay the full amount, thus owing back taxes, than to fail to file your taxes altogether. Tax evasion is, however, deliberately not paying taxes at all or underpaying taxes. Tax evasion can come in two types: evasion of assessment and evasion of payment.
- Evasion of assessment involves transferring assets to keep the IRS from finding out your true assets (e.g. reporting less than you actually have)
- Evasion of payment includes hiding assets after the tax becomes due (e.g. hiding money in a foreign bank account or a family member’s bank account)
Tax evasion is a felony, whether on a small or large scale. However, in order to be convicted of tax evasion, the prosecuting attorney must prove all three basic elements, which are the same for both evasion of assessment and evasion of payment.
- Proof the defendant intentionally did something to avoid taxes
- Proof that taxes are owed
- Proof the defendant intentionally and willfully violated tax payment
Penalties and Consequences
Depending on the facts of the case and the nature of the felony, there are a variety of penalties a person can face if charged with tax evasion. The maximum penalty is five years in prison, $250,000 in fines, plus the total taxes owed. One could also be sentenced to one year in prison and $100,000 for each year not filed. Regardless, the penalty for not filing taxes is much greater than filing taxes and not paying the full amount, but many people are afraid to pay taxes if all the money cannot be paid at once. When this happens, seeking the help of a Corpus Christi Criminal Law Attorney is highly recommended.
Many filers think of the number of years in prison and the fines as the punishment for tax evasion, but there are many residual consequences to take into consideration. If the taxpayer is unable to pay the penalty amount out of pocket, they will forfeit Social Security benefits, face a tax lien on any property, lose both money and property assets, and face credit damage until all taxes and penalty amounts are paid.
Aside from the obvious advice of not deliberately cheating on your taxes, there are a few other things to keep in mind.
- Always file your taxes, even if you know you can’t pay it all.
- Keep accurate records. When it doubt as to whether to keep something or not, keep it.
- The IRS is there to help, so don’t be afraid to contact them for advice.
- Know your tax preparer. There are many folks out there that will try to scam you.
Tax evasion is a big deal and is a felony offense with serious penalties and consequences. While most of us despise paying taxes, it is necessary to help the country run the best that it can. Just make sure you are as honest as you can be when reporting and don’t try to pull anything over on our government. It’s just not worth having tax evasion on your record.