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Avoiding Tax Evasion

September 11, 2015  |   Tax Scams   |   Tags: , ,  

Tax evasion is often intentional, but sometimes even a well-meaning taxpayer can inadvertently face charges of tax evasion. There are various circumstances that can lead to an individual being suspected of tax evasion. Below are some common examples:

tax evasion

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.

A taxpayer is required to report income from all sources, which includes any income earned overseas. Taxpayers are also required to disclose all assets, including those overseas, to the IRS.

Failure to Pay Taxes

Usually, failure to pay taxes leads to a 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 lead taxpayers to trouble with the IRS and law enforcement agencies. Therefore, 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 a 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 determines if an error was made or an attempt at tax fraud was made.