When an individual, corporation, or trust attempts to avoid paying the full amount of taxes owed through fraudulent means, it is considered tax evasion. Failure to pay personal or corporate income taxes is subject to the same penalties. It is also illegal to file a fraudulent tax return or to make false statements on a return or to auditors. A tax fraud/evasion conviction can result in fines, asset forfeitures, and prison time.

Examples of Tax Evasion/Fraud

Tax evasion charges can stem from a variety of activities, including some of the following more common instances:

  • Hiding income or not reporting assets
  • Receiving income under a false social security number
  • Keeping two separate sets of books tracking income and expenses, to facilitate hiding income and legitimize false reports
  • Failing to keep records
  • Destroying evidence, including records or receipts before an audit
  • Lying during an audit
  • Hiding income in offshore accounts

Tax Fraud Penalties

Attempts to evade taxes or the willful failure to collect or pay taxes are felonies under federal tax laws. Individuals can be subject to up to 5 years in a prison, a fine of up to $250,000, or both. If filing on behalf of a corporation, a taxpayer may be subject to the same 5 years sentence, but fines can be as high as $500,000. Filing a tax return that includes false statements is also a felony for either an individual or a tax preparer acting on their behalf. Charges can result in 3 years in prison and a fine of $250,000, or both. A corporation may be fined up to $500,000.

Tax Evasion Prosecutions

There are three elements which must be part of a tax evasion case in order for the government to prosecute. These are; proof of a tax deficiency, a willful evasion or attempted evasion to pay the full amount owed, and an act which demonstrates the evasion or attempted evasion of paying taxes. Each of these elements provides an opportunity for defense strategies for a lawyer with experience in tax fraud prosecutions.

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