What Is Tax Fraud & Tax Evasion?
Tax fraud occurs when a person (or a business entity) falsifies their tax records to reduce or limit their tax liability. Tax fraud is not the same thing as making a mistake on your taxes. Tax fraud occurs when someone intentionally cheats on their taxes to avoid paying what they rightfully owe. Tax evasion occurs when someone attempts to avoid paying their tax liability and can be seen as a type of tax fraud.
There are a number of ways someone can commit tax fraud, including:
- Willfully failing to file a tax return
- Intentionally failing to claim all income
- Claiming false deductions or dependents
- Intentionally omitting or misrepresenting information on a tax return
- Attempting to write off personal expenses as business expenses
- Using a false social security number
Examples of how a business may commit tax fraud include:
- Intentionally failing to file payroll tax reports
- Not withholding federal income taxes from employee pay
- Not reporting cash payments made to employees
Examples of tax evasion include:
- Intentionally failing to pay your taxes
- Intentionally underpaying your taxes
- Misrepresenting income
- Hiding money in offshore accounts
It is estimated that tax fraud costs the US government millions (if not billions) of dollars every year. Under the IRS tax code, both tax fraud and tax evasion are illegal. Tax fraud is a serious crime, and the penalties associated with it can be severe. In addition to being responsible for any taxes owed, if you are found guilty of tax fraud or tax evasion, you may also face fines and even jail time.
Can You be Charged with Tax Fraud at the State Level?
Tax fraud and tax evasion may be charged at either the state or federal level. Where you are charged depends on whether you have been accused of evading or falsifying your federal or state taxes. Additionally, the circumstances of your case will determine if you are charged with a felony or a misdemeanor. The laws surrounding tax fraud and tax evasion are very complicated at both the state and federal levels. If you are facing charges, it is important that you consult with an attorney to ensure that you understand your charges.
Penalties of a Conviction
The penalties of a tax fraud or tax evasion conviction can be incredibly severe. Not only do you face having to pay back your owed taxes plus thousands of dollars in fines, but you may also be required to serve time in a state or federal prison. In addition to these immediate penalties, you also face the long-term ramifications of having tax fraud on your criminal record. This can make finding employment difficult and can negatively impact other legal matters you may be dealing with. In fact, a conviction can derail your entire life.
A famous example of tax evasion is the case of the actor Wesley Snipes. After being convicted of tax evasion, he was sentenced to three years in prison and was further fined $5 million. While this is a dramatic case, the penalties he faced are not uncommon. This serves to highlight how important it is that you secure strong legal representation if you are facing charges or if you believe you are under investigation for tax fraud or tax evasion.
At Hanson, Gorian, Bradford & Hanich, we understand how serious tax fraud charges are, and we are proud to offer our clients aggressive representation. If you are facing charges, schedule an appointment with one of our attorneys online. We are prepared to use our experience to help you with your case.