When does tax avoidance cross over into tax evasion?

On Behalf of | Apr 16, 2020 | Firm News

Like just about everyone else across the country, including here in Connecticut, you don’t want to pay even one dollar more than you have to at tax time. The U.S. Tax Code allows taxpayers to work toward that goal through the use of numerous credits and deductions that are available for those who qualify to use them.

If you use credits and deductions correctly, you are guilty of nothing more than legal tax avoidance. Another way you could legally avoid taxes is by participating in your employer’s retirement plan. By taking these steps, you are avoiding paying more taxes than you have to, and this is not tax evasion.

So, when does the IRS consider it tax evasion?

The IRS knows that preparing a tax return isn’t an exact science. People make mistakes, and if you make an honest one, you can correct it and make any necessary payments, and everyone can move forward. However, if the IRS believes you used one or more of the following to purposely avoid paying taxes, then it probably suspects you of tax evasion:

  • You falsely allocate income.
  • You purposely underreport your income.
  • You conceal assets.
  • You over-report deductions on purpose.
  • You improperly claim exemptions or credits.

As you can see from the above, the primary difference between a mistake and tax evasion is intent. Most tax evasion cases begin with an audit. If the IRS audits you, and you cannot prove certain deductions, credits or exemptions with the proper documentation, you may receive additional taxes, interest and penalties. That may be the end of it.

What happens if it doesn’t end with the audit?

If the IRS believes you intentionally attempted to defraud the government, you may face criminal and/or civil charges. Make no mistake, the nation’s taxing authority knows how to obtain a conviction. While criminal defense attorneys have their place, when it comes to criminal tax matters, you may want to enlist the help of a tax attorney with experience in criminal tax matters such as tax evasion.

Your future is at stake. People spend years in prison for tax crimes, pay hefty fines and penalties, and may never return to their professions once word of an investigation gets out. You need aggressive, knowledgeable and competent advocacy if you face accusations of tax fraud. If you did not consult with a tax attorney when you received word of an audit, you may want to do so as quickly as possible now.