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What do I need to know about tax evasion?

| May 14, 2021 | Tax Law |

The federal government is fierce in its requirement that taxpayers honestly pay their taxes. If the Internal Revenue Service (IRS) believes someone is trying to cheat the system, they will investigate and, depending on what they find, aggressively build a case. But even the most truthful of taxpayers could make a mistake on their returns. Afterall, the tax code that guides tax filings is very complicated. So when does a simple mistake rise to the level of a crime?

What does a tax evasion case look like?

In a recent example, the IRS built a case against two brothers who had a farming business. The agency claimed to two actively hid money from the IRS in order to get out of paying their tax obligations.

How did they actively hide money?

According to the feds, the two entrepreneurs transferred earnings from their business into accounts and did not tell their accountant, who prepared their tax returns, about these accounts. The agency claims one brother hid over $718,000 leading to a failure to pay more than $240,000 in tax obligations. The other allegedly hid almost $250,000 and failed to pay $183,000 in taxes.

What should I learn from this case?

This case shows an example of what tax evasion can look like. Other common examples can include filing a tax return with incorrect information, using false invoices to hide money, destroying records, overstating deductions, or placing property in someone else’s name.

In each example, the IRS will generally try to build a case by claiming the taxpayer took action to avoid their taxes. This intent is one of the keys to building allegations of tax evasion. Next, the IRS will need to show that a tax is due and that the taxpayer was willful in their actions.

What should I do if I am accused of tax evasion?

It is important to take any allegations of a tax crime seriously. Depending on the details of the claims, the allegations could lead to more than just a fine — they could lead to prison time.

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