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Tax Evasion, a White Collar Crime

If someone is avoiding tax, it’s not necessarily a criminal offense. “Taxpayers have the right to reduce, avoid, or minimize their taxes by legitimate means,” according to the Internal Revenue Service (IRS).

When one legally avoids a tax, they do not conceal anything, nor do they misrepresent material facts. Instead, the taxpayer shapes and plans events so they can reduce or eliminate their tax liability, all the while staying within the confines of the law.

So, what is tax evasion? “Evasion involves some affirmative act to evade or defeat tax, or payment of tax. Examples of affirmative acts are deceit, subterfuge, camouflage, concealment, attempts to color or obscure events, or make things seem other than they are,” says the IRS.

Tax evasion includes but is not limited to:

  • Failing to report income
  • Making false claims
  • Filing a false tax return
  • Willfully not filing tax returns
  • Willfully failing to pay the taxes due
  • Underreporting one’s income
  • Working for cash and not reporting the income
  • Filing under someone else’s name or Social Security number

Individuals and businesses commit tax evasion. Often, business owners commit tax evasion by accepting cash from clients and paying their employees in cash and not reporting the cash payments. In turn, the employees commit tax evasion by not reporting their cash income.

Tax fraud and tax evasion are basically the same thing. Fraud has to do with intentional misrepresentation or willful deceit, and tax evasion involves the same elements. When people commit tax evasion, that’s what they’re doing – willfully deceiving the IRS so they can reduce or eliminate their tax obligations.

CONSEQUENCES OF TAX EVASION

Tax evasion is a serious white collar crime under Title 26 USC § 7201. The penalties for tax evasion include:

  • Up to 5 years in prison, or a fine not to exceed $250,000 for individuals and $500,000 for corporations, or
  • Both a fine and imprisonment.

Who commits tax fraud the most? Service-based workers; for example, hair stylists, house cleaners, massage therapists, dog groomers, caterers, and gardeners who deal in a lot of cash. Also, some self-employed individuals who are sometimes paid in cash commit tax evasion. Such individuals tend to commit tax evasion because it’s easy for them to hide their cash income.

Related: Tax Evasion Charges in Orange County

If you’re under investigation for tax evasion, you could face hefty fines and imprisonment upon conviction. In the face of federal charges, contact the Law Offices of Virginia L. Landry, Inc. to schedule a free consultation.

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