What Is Tax Evasion?

Tax evasion involves deliberately and illegally avoiding the payment of a true 澳洲幸运5官方开奖结果体彩网:tax liability. Willfully failing to pay taxes is a federal offense under the 澳洲幸运5官方开奖结果体彩网:Internal Revenue Service (IRS) tax code. People caught evading taxes are generally subject to criminal c🎃harges and substantial penalties.

How Tax Evasion Works

Tax evasion applies to both the illegal nonpayment as well as the illegal underpayment of taxes. Even if a taxpayer fails to submit appropriate tax forms, the IRS can still determine if taxes were owed based on required information from 澳洲幸运5官方开奖结果体彩网:third parties, such as a W-2 from someone’s employer or 1099s. Generally, someone is not considered to be guilt💙y of tax evasion unless the failure to♎ pay is deemed intentional.

Failure to pay proper taxes can lead to criminal charges. In order for charges to be levied, it must be determined that the avoidance of taxes was a willful act on the part of the taxpayer. Not only can a person be liable for payment of any taxes that have been left unpaid, but they can also be found guilty of official charges and may be required to serve time in prison. According to the IRS, the penalties include jail time of no more than five years, a fine of no more than $250,000 for individuals ($500,000 for corporations), or both—along with the costs of prosecution.

What Qualifies As Tax Evasion?

A variety of factors are considered when determining if the act of failure to pay was intentional. Most commonly, a taxpayer’s financial situation will be examined in an effort to confirm if the nonpayment was the result of committing fraud or of the 澳洲幸运5官方开奖结果体彩网:concealment of reportable income.

A failure to pay may be judged fraudulent in cases where a taxpayer made efforts to conceal assets by associating them with someone other than themselves. This can include reporting income under a false name and 澳洲幸运5官方开奖结果体彩网:Social Security number (SSN), which can also constitute identity theft. A person may be judged as concealing income if they fail to report work that did not follow traditional payment recording methods. This can include a൩cceptance of a cash payment for goods or services rendered witho🥃ut reporting it properly to the IRS during a tax filing.

Tax Evasion vs. Tax Avoidance

While tax evasion requires the use of illegal methods to avoid paying proper taxes, tax avoidance uses legal means to lower the obligations of a taxpayer. This can include efforts such as charitable giving to an approved entity or the investment of income into a 澳洲幸运5官方开奖结果体彩网:tax deferred mechanism, such as an 澳洲幸运5官🅰方开奖结果体彩网:individual retirement account (IRA). In the case of an IRA, taxes on the invested funds are not paid until the funds, and any applicable interest payments, have been withdraꦬwn.

The Bottom Line

Tax evasion is the illegal, intentional nonpayment or underpayment of taxes due, and those who engage in it can be subject to criminal prosecution, penalties, and jail time. Tax evasion is not the same as tax avoidance, which is the practice of lowering your tax obligation by legal means, such as investing in retirement accounts or taking applicable tax credits when submitting your tax return.