Gale Law Group
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Corpus Christi, TX 78404

Tax Evasion FAQ

Tax evasion is the most common federal tax crime. According to 26 U.S.C. § 7201, it’s the failure to report taxes, reporting them inaccurately, or failing to pay them. But to establish a case for tax evasion, the government must prove beyond a reasonable doubt that the following occurred:

  • The taxpayer tried to evade or defeat a tax or tax payment.
  • An additional tax was due and owing.
  • The taxpayer acted willfully.

If the IRS can prove a case for tax evasion, the taxpayer can face significant penalties (which can include fines and even jail time).

tax evasion island
Who can be prosecuted for tax evasion?

26 U.S.C. § 7201 says that “any person who willfully attempts in any manner to evade or defeat any tax imposed by the title of payment thereof shall, in addition to other penalties provided by law, be guilty of a felony.” The definition of the crime of tax evasion refers to “any person,” which gives the statute a broad scope. Because of this, it can apply to an individual taxpayer. But, it can also apply to their tax preparer, accountant, or bookkeeper.

26 U.S.C. § 7201 can also apply to any corporate officer who is trying to evade corporate tax, as well as any administrator of an estate who is trying to evade any applicable taxes. The looseness of the statute’s language means that any person other than the taxpayer can be prosecuted for the evasion of taxes, even if the person “aided and abetted” the taxpayer.

The statute also uses the phrase “any manner,” which allows the crime to include any attempt to evade taxes. People can be prosecuted even if the attempt was unsuccessful. The statute also includes a broad description by using the phrase “any tax,” so it’s not limited to income tax. It can also include estate tax, excise tax, or employment tax.

How does the IRS find tax evasion cases?

The IRS finds most tax evasion cases from income or payroll tax audits. The revenue agent performing the audit will try to find any understated income or deductions, as well as any evidence that you’re paying your employees in cash. If the IRS does find evidence of tax evasion, they will ask you a series of questions in an interview. You don’t want to answer any of them, because they tend to show specific intent.

To find tax evasion cases, the IRS looks for badges of fraud. Some of them can include, but may not be limited to:
-Significantly understated income.
-Significantly overstated deductions.
-Making false claims on your tax returns.
-Having a foreign bank account that you don’t report to the IRS.
-Making false entries in an accounting program (such as Quickbooks).
-Having two sets of books.

Using several corporations (including foreign ones) to hide income or assets offshore.
Be sure to speak to a qualified attorney for more information

When will I know if the IRS is investigating me for tax evasion?

It’s hard to know when the IRS is investigating you for tax evasion, but you can look for certain clues. The biggest one is that you’re going through an income or payroll tax audit and the IRS is involved in the case for the first several months before becoming absent by not returning phone calls or not asking for any additional information. It usually means that the Revenue Agent is going to his or her group manager, who may go to the IRS District Counsel to see if there’s potential for a tax evasion case.

What is the difference between tax evasion and tax avoidance?

Tax avoidance is a practice that’s perfectly legal and is even supported by cases from the U.S. Supreme Court. It’s the practice of structuring your business transactions and personal affairs to maximize your benefit within the limits of Tax Law. Tax evasion is when you have the specific intent to either report income or overstate deductions on your business or personal income tax or payroll tax returns, so you can get a tax benefit that’s not allowed by Tax Law.

What can I do during an audit to avoid prosecution for tax evasion?

The best way to convince the IRS that there’s no evidence of tax fraud or tax evasion is to have a good strategy going into the process. This includes knowing what the potential problems are and which documents can prove or disprove the case. It will also make it easier to explain any problems as accounting errors.

Is tax evasion a federal crime?

According to Section 7201 of the US Internal Revenue Code, tax evasion is considered a federal crime. It also lists two ways that it can be committed. The first involves the willful attempt to evade or defeat the assessment of your taxes, while the other one involves the willful attempt to evade or defeat a tax payment. The prosecution must be able to prove “beyond a reasonable doubt” that you performed these actions with deliberate intent, so the term “willful” is an important one.

Federal tax crimes are serious. And if you’re convicted, you could be facing some serious consequences. The justice system doesn’t look too fondly on people who are convicted of tax crimes, so you can expect to get the harshest possible penalty — some which can limit your ability to find employment or even run your own business.

Can I go to jail for tax evasion?

If you’re convicted of tax evasion, you can go to jail. But because it has to go through the court system, the process will take time. The IRS also has to put a series of things into motion before they can pursue criminal prosecution. In some cases, the process will start with an audit of a filed tax return. The IRS will look for trends that may indicate a pattern of “willful evasion” over the course of several years and whether the erroneous amounts were significant. Most people will be prosecuted for tax evasion because of unreported income. They might have left out a considerable number of transactions or even entire sources of income.

If you’re being accused of tax evasion and are looking for criminal defense attorney in Corpus Christi to help you with your case, be sure to get in touch with Gale Law Group.