What Constitutes Tax Evasion or Tax Fraud?

Tax-related offenses can be the result of unintentional or intentional misfiling. Whatever your case, it is critical that you understand the elements of a tax fraud lawsuit so you can better defend against the charges. In today’s blog, we will discuss what the prosecution needs to prove in a tax evasion or tax fraud case and the ensuing penalties that the charge will carry.

Elements of Tax Evasion or Tax Fraud

Tax evasion and tax fraud are serious crimes in Massachusetts and in the United States. Prohibited tax fraud-related activity includes:

  • purposefully failing to file any required tax report or return;
  • filing a false/misleading document in connection with any tax return, audit, or investigation;
  • failing to supply the correct information in a timely manner;
  • intentionally evading any tax or failing to pay a tax;
  • claiming a false exemption.

The IRS recognizes two forms of tax evasion: evasion of assessment and evasion of payment. Evasion of assessment occurs when a person transfers assets to prevent the IRS from determining their actual tax liability, and evasion of payment occurs when a person hides their assets after a tax becomes due and owing.

Note that in the case of evasion of assessment, the taxpayer must have performed some action that was focused on defeating the assessment of a tax. These cases often require more than a proof of negligence. Any intentional under-reporting qualifies as an attempt to evade if the intent to do so can be proven.

Evasion of payment heavily emphasizes the presence of affirmative acts to evade payment, which generally involves concealment of money or assets with which the tax could have been paid. Such an act could also take the form of removing the assets from the reach of the IRS, such as transferring funds to a foreign bank account. Simply failing to pay taxes owed, though, is not evasion of payment. You must have actively sought to conceal your assets, such as transferring funds to a family member’s bank account, to be guilty of payment evasion.

In order to convict someone of tax evasion, the United State Attorney must prove beyond a reasonable doubt that:

  • The person attempted to evade assessment or payment of a tax by performing an “affirmative act” (you intentionally did something to avoid your taxes).
  • A tax is due and owing.
  • The action was a voluntary, intentional violation of a known legal duty.

Note that a taxpayer’s good faith belief that no tax law violation has occurred is not a valid defense against a tax evasion charge.

Common Tax-Related Crimes

Common tax fraud-related crimes include:

  • failure to file a tax return;
  • failure to pay taxes;
  • filing a false tax return;
  • tax money laundering;
  • underreporting income;
  • overestimating expenses or deductions;
  • failing to collect employment taxes;
  • violating employer withholding requirements;
  • not filing a yearly tax return.

Crimes often associated with tax evasion or tax fraud include embezzlement, forgery, insurance fraud, falsifying business records, grand theft, and other white collar crimes.

Penalties and Sentencing

Tax fraud is charged as a felony punishable by up to 5 years in prison, up to $100,000 in fines, and restitution. For less severe circumstances and with the help of an experienced attorney, you could argue for misdemeanor charges that call for civil penalties including smaller fines and restitution.

Tax evasion, on the other hand, is punishable by up to 5 years in prison, a fine of as much as $250,000, and payment of any taxes owing. Some common criminal penalties for specific types of tax evasion are:

  • Not Filing a Return – generally carries civil tax penalties, but in extreme cases can carry up to 1 year in prison and $100,000 in fines for each tax year not filed.
  • Filing a Fraudulent Return – criminal felony that carries up to 3 years in prison and $100,000 in fines.
  • Misrepresent or Conceal Financial Information – criminal felony with a maximum of 5 years in jail and $100,000 in fines.
  • Failing to Pay Taxes – felony offense with up to 3 years in prison and $250,000 in fines.

Seek an Experienced Attorney. Contact Brad Bailey Law Today!

If you are facing tax-related charges or fear you may, contact an experienced attorney immediately to evaluate your case. The penalties for a tax fraud or tax evasion charge are not light, and you may end up owing a significant amount of fines on top of jail time. Brad Bailey Law has years of experience handling white collar crimes and can take on your tax fraud case with the knowledge and confidence necessary to represent you in court.

Contact Brad Bailey Law today to schedule your consultation.

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