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What You Should Know About Tax Evasion

mans hand looking at paperwork with coins on table

What Is Tax Evasion?

Tax evasion is a white-collar crime that occurs when an individual or company intentionally underpays or does not pay their taxes. This is different from tax avoidance, which is when taxpayers use legal avenues to reduce their tax liability.

Establishing Proof of Tax Evasion

In order to find someone guilty of committing tax evasion, prosecutors must prove three key elements of the offense.

  • There is an unpaid tax liability,
  • The defendant took direct action to evade the tax payment, and
  • The defendant had the intent to underpay or not pay the tax.

Accidental Tax Evasion

While most crimes you cannot commit by accident, tax crimes are different. You may be wondering, if you accidentally commit tax evasion, can you be found criminally responsible? Luckily, the answer is probably not. As stated previously, tax evasion must be committed deliberately. If you did not intend to underpay your taxes or miss the filing deadline, the IRS will generally recognize this as an error and impose a monetary penalty. For example, you may be required to pay an additional 20% as a late penalty. Still, this is better than formal criminal charges.

Sentencing for Tax Evasion

If convicted of federal tax evasion, the defendant faces:

  • Up to $100,000 in fines (up to $500,000 if the guilty entity is a corporation)
  • Up to five years in prison

Additional Reasons for Tax Crime Charges

You may be charged with tax fraud, tax evasion, or another offense for:

  • Underreporting income: this involves either reporting a lower salary than what you are actually paid, or not disclosing all streams of income.
  • Exaggerating expenses: exaggerating business expenses or claiming false deductions in order to get a higher return is a crime.
  • Falsifying records: in addition to falsifying records, the individual may destroy or hide records to avoid making payments.
  • Non-filing: simply not filing annual taxes is another way individuals evade paying.

Albany White Collar Crimes Defense Attorneys

Anyone in any career and of any socioeconomic status can be charged with tax evasion or another white-collar crime. If you have recently been arrested for a financial crime, contact our Albany criminal defense team at Schillinger & Associates.