At this point, practically everyone is familiar with the term tax evasion. But out of everyone that’s heard about it, how many people understand what it is? As tax-paying adults, you must know what tax evasion is. It’s common for people to confuse tax evasion with avoidance. However, there is a big difference—tax evasion is a crime punishable by law.
Aside from the fact it is an ever-present and growing problem in the country, it is also a hot topic among people today. Understanding tax evasion is key in appreciating the need for help with tax problems. Even ordinary people like yourself can accidentally commit tax fraud or be charged with tax evasion. That’s a scary situation nobody ever wants to be in.
So today, we’re here to help you understand. In this article, we will discuss what tax evasion is and everything else you need to know.
Tax evasion is the illegal act of non-payment or underpayment of your tax liability. It’s when some either doesn’t pay the correct amount or any amount at all.
It’s a crime that’s taken very seriously by the government since the consequences can result in projects being underfunded and more. It also raises a lot of questions about the fairness and reliability of the tax system.
This particular tax problem is so severe that it has its section in the US Internal Revenue Code. According to that code, there are two kinds of tax evasion schemes.
1. Evasion of Assessment
The first step in the wrong direction is the attempt or even the random act of evading assessment. Proper tax assessment relies on your full transparency and cooperation.
People with intentions to commit tax evasion start by filing false tax returns, hiding assets, attempting to conceal income, and so much more. It’s essential to work with a tax resolution specialist to avoid unintentionally committing these acts.
2. Evasion of Payment
The act of evading payment or paying less than you owe generally occurs after you’ve filed your taxes, know your dues, and established what you owe.
Failure to pay your taxes for whatever reason can be taken as an evasion of payment and result in you being charged with tax evasion.
If you are aware of tax problems and other issues you might have that prevent you from paying your dues, work with a tax resolution specialist.
The Consequences of Tax Evasion
As a consequence of being one of today’s hottest topics, even among youth, you’re probably familiar with the many possible implications of tax evasion. Of course, based on what you’ve seen from various types of media, you might be a little confused about the truth. One thing you can be sure of is that the consequences and resulting punishments are severe.
Confirmed acts of tax evasion can lead to you being charged with a felony and substantial prison time. Guilty individuals can be fined up to $100,000 for tax evasion. Meanwhile, big businesses and corporations can face fines of up to $500,000.
Aside from the possible prison time and the costly fines, litigation can be expensive for tax evasion. In the end, you will still be held liable for the taxes you avoided and a little more on top of that.
Examples of Tax Evasion
There are many ways to intentionally or even unintentionally commit tax evasion. That’s why it’s important to know what kinds of actions can be considered tax evasion or at least evidence of it.
Here are some examples:
- Keeping a double set of books
- Making false or altered entries
- Creating false invoices
- Destroying records
- Concealing sources of income
- Handling transactions to avoid usual records
- Filing a false tax return or amended false return
- Filing false and fraudulent W-4 forms
- Corporate officer’s diversion of corporate funds to pay for personal expenses
- A consistent pattern of overstating deductions
- Concealment of bank accounts
- Doing business under diverse names
- Keeping large sums of cash in safe deposit boxes in numerous banks
- Structuring cash transactions to evade the filing of Bank Secrecy Act reports
The Bottom Line
Although known cases of tax evasion usually involve corporations, as mentioned earlier, individuals are also capable of committing this crime. The simple act of lying or concealing income can already be considered evidence or an act of tax evasion. If you want to ensure that you never run into such problems, make it a point to work with tax resolution specialists. They can guide you through various tax processes and ensure that all your affairs are in order.
Axiom Tax Resolution Group is a company that offers the help of tax relief services and specialists. We understand how complicated it can be to deal with all the processes involved in sorting out your taxes. That is why our primary goal is to provide you with permanent solutions to your tax problems. Contact us today to learn more!