Tax Evasion Laws

US citizens, permanent residents, and business entities are legally required to pay applicable taxes for the money they make in and outside the US. Non-permanent residents may also be required to pay taxes under some circumstances. However, only the income they make in the United States is subject to federal income tax. 

Failure to pay taxes is a federal offense, prosecuted in a federal court under federal tax evasion laws. If you are under investigation for a tax-related offense in Washington, DC, you may want to familiarize yourself with federal tax evasion laws. You may also want to seek legal advice from a federal tax fraud lawyer.

What Is Tax Evasion?

Tax evasion is an illegal and deliberate avoidance of taxes owed to the IRS. Under tax evasion laws, the definition of the term tax evasion is broad, allowing the IRS to go after individuals and businesses for a wide range of actions defined under the law. 

These actions include underreporting annual income, inflating qualifying deductions, concealing taxable money, and transferring funds to offshore accounts. The person or entity’s actions regarding tax evasion determine the tax evasion charges they face. 

Personal income tax evasion occurs when an individual falsifies their income data, while business tax evasion occurs when a business falsified data to pay less. On the other hand, employment tax evasion occurs when an employer avoids forwarding taxes collected from their employees to the IRS, among other employment tax avoidance techniques. 

When Can The IRS Charge You With Tax Evasion?

The IRS has a six-year window for pursuing an individual for tax evasion. Generally speaking, the IRS has three years to audit an individual or company.  However, it can increase the audit window to six years if the taxpayer understated gross income by 25% or more.  If the IRS can prove fraud the IRS could audit even older tax years, but this is rare because the IRS has a policy of generally only going back six years for non-filers.   

To succeed with a tax evasion case, the IRS must prove that the defendant has a pending tax liability, and their conduct shows an intention to evade tax. Also, it must prove each of these elements beyond a reasonable doubt to a jury. Penalties for tax evasion include fines of as high as $100,000 for individuals and $500,000 for corporations, a 75 percent civil penalty, and up to 5 years prison time.   

Tax Fraud

Tax fraud is a criminal offense that often accompanies a tax evasion charge. It involves willful falsification of information when filing tax returns to avoid paying the entire tax obligation. Actions that may fall into the category of tax fraud include claiming a false deduction, claiming personal expenses as business expenses, concealing income, and preparing and filing a false tax return. 

Tax fraud charges can sometimes arise from unintentional mistakes due to the tax code’s complexity. In such situations, you may want to work with a tax fraud lawyer for help arguing your case as negligence rather than a fraud with less severe consequences, 

Penalties for federal tax fraud include up to a three-year prison sentence and $100,000 fines for individuals and $500,000 for corporations.  

Defenses for Tax Evasion

In light of the consequences of a tax crime conviction, you want to do everything possible to avoid one. The best strategy is hiring a tax fraud lawyer for guidance. Possible defenses they may explore for your case include insufficient evidence, a mistake, unintentional conduct, or the expiration of the statute of limitations. 

Your tax fraud lawyer only needs to introduce reasonable doubts to the prosecution’s case. But as simple as it may sound, a lawyer’s expertise and experience are critical.