The Details and Penalties of Tax Evasion

Thu, Apr 11, 2013

Financial Crimes


Tax evasion is a serious crime in the United States, yet it is one that many people commit each year. While taxes are somewhat self-imposed and self-enforced, we as citizens are responsible for evaluating and paying out own tax liability. The IRS has put harsh penalties in place for those who refuse to pay taxes as they should. Regardless of the stance of theorists who choose to argue the semantics of the tax code, the IRS is allowed to enforce taxpayers’ wrongdoing, and taxes are not voluntary.

IRS Response to Taxpayer Errors

There are varying levels of IRS penalties and fees for neglecting to pay a tax liability in full. For those who simply misstate information or misinterpret the tax code, the IRS charges interest on the money they should have been paid, and may charge small penalties based on the unpaid amount. Those who are negligent or who do not file at all may be subject to additional interest and penalties. To enforce their policies, the IRS audits tax returns and, on a smaller scale, submits inquiries to taxpayers who may need to provide further information or explanation for decisions made on a tax return. However, these small errors do not constitute fraud. Many taxpayer errors are due to a lack of understanding of the tax code or simple human inaccuracies. Tax fraud requires the intent to deceive the IRS, regardless of amount or reason.

Tax Evasion as a Criminal Offense

Tax evasion is a form of fraud and goes far beyond misreporting wages or overstating withholdings. Tax evasion is the deliberate action of avoiding taxes through illegal activity. Tax evasion generally involves criminally understating taxable income or taxable liability. Tax evasion involves a clear violation of tax law, such as neglecting to report the income of subsidiaries for a corporation. Tax evasion is possible on all levels, but for the government or law enforcement to get involved, the amounts in question generally must be substantial. According to the IRS, small businesses and successful individuals are the most common perpetrators.

Penalties for Tax Evasion

Tax evasion is always a major crime but it becomes more so when large corporations cheating the government out of large amounts of money are involved. The government reserves the right to confiscate property or to impose consequences as severe as serving time in prison. In general, the IRS treats those who are intentionally and maliciously abusing the tax code in order to avoid paying the money they owe very harshly.

How to Prevent Tax Evasion

Despite the potentially strict penalties enacted on those who choose to ignore the tax code, individuals can easily avoid attracting IRS attention or falling victim to penalties and fees for negligently filing taxes. Taxpayers must be responsible for understanding the tax code and its changes year to year. If individuals do not have the time to review the rules, hiring an accountant is a great way to ensure that everything filed is done properly and up to government standards. Additionally, hiring a tax preparer guarantees that someone knowledgeable can speak to the IRS on your behalf should the IRS audit your return or submit an inquiry for further information. Be sure that anyone you hire to file your taxes is a Certified Public Accountant or an IRS Enrolled Agent; these professionals have a higher level of training than other alternatives. It is far easier to pay the tax you owe than to attempt to unlawfully avoid income taxes. To prevent penalties from the IRS, be sure you are comfortable with tax laws before filing, or trust your return with an educated, certified tax professional.

 Byline: Last year, Jeffrey received R&G Brenner Tax Help to help him file for his business last year.

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