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avoiding tax evasion

Avoiding Tax Evasion

September 11, 2015  |   Last modified on May 21, 2021

Tax evasion is an illegal activity that can result in criminal charges and substantial tax penalties. Although it is often intentional, even a well-meaning taxpayer may find themselves inadvertently facing charges of tax evasion.

What Can Get You Into Trouble With The IRS?

Many tax evasion cases start with a tax audit. During the audit, the IRS may find errors or omissions that the taxpayer knowingly committed. If there is a pattern of deceit over several years or the amount is substantial, the IRS may pursue tax evasion charges. Here are a few examples of issues that may get you into tax evasion trouble with the IRS:

Non-Reporting of Overseas Income

Taxpayers are not always aware that they need to report and pay taxes on income earned overseas. When the IRS discovers that certain income sources have not been reported on a tax return, a taxpayer may face fines or even prison time on charges of tax evasion.

Failure to Pay Taxes

Failure to pay taxes typically leads to tax debt, but it can also lead to charges of tax evasion. If a taxpayer refuses to pay taxes and attempts frivolous arguments, such as taxes are voluntary or illegal, the IRS may take the case to court for resolution.

Tax Havens and Fraudulent Organizations

Stacking unreported money and assets in tax havens is punishable by law. A taxpayer can hold bank accounts overseas, but they must be disclosed to the IRS and required taxes must be paid on overseas money and assets.

Many times, fraudulent individuals dupe taxpayers into keeping unaccounted money and/or assets with them, usually in tax havens. Such schemes are illegal and can get taxpayers into trouble with the IRS and law enforcement agencies. Taxpayers should check the background and authenticity of trusts and charities before doing business with them.

Falsifying Documents

Filing false documents or presenting false documents to the IRS during an audit is a punishable offense. Whether the false documents lead to tax evasion or not, it can trigger penalties and/or jail time. When providing supporting documents to the IRS, check their authenticity before filing.

Claiming False Exemptions and/or Deductions

If a taxpayer claims false credits, deductions, and/or exemptions on his/her tax return, it can lead to tax debt, or, at least, trigger an IRS audit. Depending on certain factors such as previous cases of non-compliances and the impact of false exemptions on the tax bill, the IRS will decide if an error occurred or the taxpayer committed tax evasion.

Tax Evasion & The IRS

Although the number of taxpayers who owe the IRS has tripled since 2002, the number of tax evasion cases has actually decreased. This is due to the reduction in agency resources, which makes pursuing criminal charges difficult. But don’t get too comfortable. The IRS is expected to get a big budget boost in 2022. The money will be used to increase tax audits and enhance taxpayer compliance.

If you can’t pay your taxes or have failed to file your returns, now is the time to seek help from a tax professional. At Tax Assistance Group, we can help you get back on track with the IRS and avoid possible tax evasion trouble.