• Tax Evasion: Frequently Asked Questions:

    Author : White Collar Firm March 3, 2015

    What is tax evasion?

    Tax evasion or tax fraud is an illegal attempt to evade the payment of taxes, and it usually involves taxpayers deliberately misrepresenting or concealing their financial records to the tax authorities to reduce their tax liability.

    Charges may relate to federal or state taxes ‒ or in some cases perhaps even local taxes. Common examples of tax evasion include under-reporting income, improperly claiming deductions and falsifying tax returns. Individuals, corporations and trusts, and other entities can be convicted of tax evasion.

    Under the Internal Revenue Code, tax evasion is a federal crime and is taken very seriously as it carries serious penalties including the possibility of heavy fines and in some cases, incarceration. Suspected tax offenders are investigated by a special department of the Internal Revenue Service (IRS) and then prosecuted by the U.S. Attorney’s in U.S. Tax Court.

    What is the difference between tax evasion and tax avoidance?

    Tax evasion is any use of illegal means to avoid paying taxes. Generally, tax avoidance refers to the use of legal means to avoid paying taxes.

    What are the different types of tax evasion?

    Tax evasion can come in all shapes and sizes. The different forms include income tax evasion, corporate tax evasion, sales tax evasion, estate tax evasion and foreign tax evasion. In addition, tax evasion is commonly associated with other white collar crimes including money laundering and fraud.

    What statute covers tax evasion?

    Tax evasion is governed under 26 USC § 7201.

    Who prosecutes for tax evasion?

    Individuals suspected of tax evasion are first investigated by the IRS Criminal Investigation Division. The CID conducts in-depth investigations during which they monitor mail and even apply for wiretaps. After completing their investigation, the CID then chooses whether to recommend the suspect for prosecution to the United States Department of Justice Tax Division. This department once again reviews suspects. Should the Department of Justice Tax Division find reasonable grounds for tax fraud, they send the suspect’s name to the U.S. Attorney General for prosecution. Due to the massive effort in investigating tax crimes, this has about an 80 percent conviction rate.

    What are the penalties for tax evasion?

    Tax evasion is a felony and those found guilty can be fined up to $100,000 and/or imprisoned for as much as 5 years.

    How is tax evasion proved?

    In order to prove tax evasion, the prosecution must show three elements: 1. An unpaid tax liability exists 2. There was an affirmative action by the defendant in an attempt to evade a tax 3. The defendant possessed specific intent to evade this tax burden

    Defendants convicted of tax fraud have a right to a trial by jury who must find the defendant guilty of all three elements beyond a reasonable doubt.

    What is the statute of limitations for criminal tax evasion?

    The statute of limitations is 6 years starting from the last day an affirmative action was committed.

    What are some famous tax evasion cases?

    Here is a list of just a few of the celebrities who have been associated with tax evasion:

    •Wesley Snipes

    •Willie Nelson

    •Martha Stewart

    •Marc Anthony

    •Nicolas Cage

    •Darryl Strawberry

    What to do if you are charged or investigated for tax evasion?

    Suspected cases of tax evasion can be reported by contacting the IRS, and The Blanch Law Firm.

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