July 2, 2017

Denver Tax Attorney   What You Need to Know About Tax EvasionTax evasion is the most common federal tax crime. It can be defined as the failure to report taxes, the failure to pay taxes, or the reporting of taxes inaccurately.

In order to establish a case for tax evasion, the government must be able to prove each of the elements of this offense. You, the taxpayer, are assumed to be innocent and need not prove your innocence. The government’s failure to prove any element beyond reasonable doubt will result in an acquittal.

For the crime of tax evasion under Title 26, United States Code, Section 7201, the statute provides the following elements:

  • The existence of a tax deficiency;
  • Attempted evasion or an affirmative act of evasion of tax;
  • Willfulness on the part of the defendant.

A tax deficiency may result from understating income, failing to report income, or claiming improper credits or deductions. To find evidence of your income, the government may look into records such as your bank deposits and books of your business. These records will then be compared against your tax return to check for any substantial differences.

If you have unpaid taxes, it does not automatically constitute tax evasion. According to the statute, you are only guilty of evading taxes if you committed an affirmative act to escape paying your taxes. Also, this affirmative act must be deemed willful.

Willfulness can be defined as the intentional and voluntary violation of a known legal duty. The IRS can use circumstantial evidence and not necessarily evidence that expressly shows you were aware you were evading your tax obligation. You may perhaps argue that you were unaware of the legal requirements you violated or that you were relying on the advice of a tax professional when filing your return.

Examples of affirmative and willful acts of tax evasion include making false entries in records, keeping a double set of books, generating false receipts or invoices, altering records, concealing sources of income or assets, and filing a false tax return.

If the IRS successfully proves its case against a taxpayer for tax evasion, civil tax fraud penalties can amount to 75 percent of the tax amount owed. Criminal tax penalties may also involve jail time and steep fines. According to the statute, the maximum fine for tax evasion is $100,000 for individuals and is $500,000 for corporations. The offender will also be required to pay restitution or the amount of tax owed.

Tax evasion is a felony—not a misdemeanor, and is taken seriously regardless of the amount of tax owed. Though some federal judges have asked the government to first establish that the amount owed is substantial, the statute does not expressly state that a substantial amount be owed in taxes to fall under tax evasion.

Categories: Tax Evasion