What Are the Potential Penalties for Tax Evasion?

 Posted on December 30, 2019 in Tax Audits

If you are being investigated for tax evasion, you may feel lost, confused, and concerned about the possible penalties you may face. The federal offense of tax evasion occurs when an individual or corporation intentionally and systematically attempts to avoid paying taxes. The offender may falsify documents, fail to report income, or use other illegal tactics to reduce his or her tax obligations. In the last decade, countries around the world have worked together to prevent individuals from concealing income in foreign banks. Tax evasion can include any procedures that allow assets, financial instruments, or revenue to go untaxed or be taxed at a lower rate. The potential penalties for tax evasion can include heavy fines and incarceration. If you are being audited by the IRS, you should know how federal laws may affect you.

Federal Law Regarding Tax Evasion

Tax evasion is a willful act. Simply making mistakes on your tax return will not result in tax evasion charges. Section 7201 of the Internal Revenue Code describes the offense of tax evasion. In order for the IRS and other authorities to prove that a party engaged in tax evasion, they must prove that:

• The party has an unpaid tax liability.
• The party intentionally took actions to evade or avoid taxes.
• The party had “specific intent” to evade his or her duty to pay a certain tax.

Because tax evasion is a criminal matter, prosecutors must prove these elements beyond a reasonable doubt to convict a person for tax evasion.

Criminal Penalties for Tax Evasion

The penalties associated with tax evasion vary depending on the amount of the avoided tax, as well as other circumstances. If a person is found guilty of tax evasion, he or she will face a fine of up to $100,000. The person will also be responsible for paying all back taxes owed to the IRS. The maximum fine for a corporation convicted of tax evasion is $500,000. In addition to these penalties, individuals convicted of tax evasion can face a prison sentence of up to 5 years.

The Internal Revenue Service is primarily concerned with collecting unpaid taxes rather than imprisoning people. This means that, in most cases, the IRS will only hand the case over to the Department of Justice for criminal prosecution as a last resort. If you are being investigated for possible tax fraud or tax evasion, a trained tax attorney can work with you to help you understand all of your available options and to minimize the penalties you may be facing.

Contact a San Jose, CA Tax Audit Lawyer

If you are the subject of an IRS audit, contact John D. Teter Law Offices for help right away. Knowledgeable San Jose tax law attorney John D. Teter has a record of success helping clients resolve tax issues civilly and avoid criminal prosecution. To schedule a confidential consultation to discuss your concerns, call our office at 408-866-1810 today.

Sources:

https://uscode.house.gov/view.xhtml?req=(title:26%20section:7201%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section7201)&f=treesort&edition=prelim&num=0&jumpTo=true

https://www.irs.gov/irm/part9/irm_09-001-003#idm140038589942368