What is Tax Evasion?

 Posted on August 18, 2017 in Taxation Law

You may not be a millionaire celebrity or a huge corporation, but that does not mean you cannot be guilty of tax evasion. Even though these are the types of people and entities typically associated with tax evasion, any person who files tax returns could find himself or herself under investigation for this serious crime.

According to the Internal Revenue Code § 7201, tax evasion involves “[a]ny person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof.”

Thus, this law sets forth two kinds of tax evasion:

1. The willful attempt to evade or defeat the assessment of a tax; and

2. The willful attempt to evade or defeat tax payment.

For example, if the taxpayer transfers assets to prevent the IRS from determining his or her tax liability, he or she could be found guilty of evasion of assessment. If the assets were transferred after a tax liability is due, he or she could be found guilty of payment evasion.

You must file a tax return for yourself or your business to be guilty of evasion. Failure to file altogether is a different issue.

The Willfulness Requirement

Either offense requires “willful” action on the part of the taxpayer. Willfulness is defined as the "voluntary, intentional violation of a known legal duty." This means that if the taxpayer has a good faith belief that he or she is following the law, then he or she should not be prosecuted for such an offense.

For example, if you accidentally transposed numbers when reporting your income or were relying on law that was unsettled or vague, you may not meet the willfulness requirement.

Penalties for Tax Evasion

The Code provides that if found guilty of tax evasion, a person or business could face a fine of not more than $100,000 ($500,000 for corporations) or imprisoned not more than 5 years, or both. The costs of prosecution can also be part of the fine.

Call a California Tax Lawyer

Tax evasion can take place after an audit has begun. It is important to contact an experienced attorney if you are concerned with anything in your tax return, especially if you are under audit, to determine what you are required to provide to the IRS.

Tax evasion is a serious offense and getting a lawyer involved as soon as possible can mitigate any consequences you may be facing. Contact the knowledgeable San Jose tax attorney at John D. Teter Law Offices at 408-866-1810 to schedule your first meeting with our firm.

Source:

https://www.irs.gov/pub/irs-utl/tax_crimes_handbook.pdf