What is Tax Evasion?
Tax evasion happens when someone deliberately takes steps to hide income or avoid paying taxes. It’s important to distinguish between tax evasion and a simple error. For example, if you deduct a dinner with your spouse as a business expense, that’s not a crime—it’s just a mistake, and you’ll owe the taxes and maybe a penalty. But when someone hides income or underreports it on purpose, that’s tax evasion.
One case I dealt with involved a business owner who lived a high-end lifestyle—Lamborghinis, million-dollar homes, wild parties—but never filed taxes because he wasn’t receiving a paycheck. The reality? He was funneling company money for personal use and not reporting it. That’s tax evasion, plain and simple.
Tax evasion can take different forms, some more subtle. For example, I once worked on a case where a commercial landscaping company was methodically leaving out every 14th invoice when they reported income to their CPA. This allowed them to hide hundreds of thousands of dollars every year. The IRS uncovered this by comparing bank deposits to the invoices, exposing the fraud. That’s the kind of deliberate action that leads to criminal charges.
When Does the IRS Suspect Tax Evasion?
The IRS has powerful tools to compare your reported income with what third parties like clients, banks, and businesses show in their records. If things don’t line up, expect the IRS to start asking questions. Sometimes the IRS will initiate a criminal investigation based on a tip from the public or law enforcement agencies across the country.
Penalties for Tax Evasion
Individuals found guilty of tax evasion can face fines of up to $100,000 (or $500,000 for corporations) and imprisonment for up to five years. These penalties are in addition to the costs of prosecution. The law doesn’t take these offenses lightly, and being convicted of tax evasion can result in both financial and criminal consequences. If you’re unsure about your tax situation or concerned about potential liabilities, it’s essential to seek professional legal assistance before it escalates into a more severe issue.
How the IRS Collects Unpaid Taxes
Once they determine you owe money, you’ll get a notice. This notice outlines the amount owed, including penalties and interest. You have the opportunity to pay it, set up a payment plan, or face more severe actions like wage garnishments, levies on your bank account, or even a tax lien on your property.
What Are Your Options?
If you can’t pay the full amount right away, the IRS offers installment plans. There’s also something called an Offer in Compromise (OIC). This allows you to settle your tax debt for less than what you owe, but only if you qualify. The IRS will dig into your finances before agreeing to an OIC, so it’s not an easy route.
When Should You Get Help?
If you’re dealing with an audit, back taxes, or criminal charges, it’s time to get help. You need someone who understands how the IRS works from the inside. I once worked on a case where a business owner didn’t know his employees were pocketing cash from the company safe while he was in the hospital. Even though he wasn’t initially aware of the situation, he was still in the IRS’ crosshairs.
Through tactful representation, I was able to keep the matter out of the IRS criminal division and my client was never charged with a tax crime. Situations like these are complicated, and a tax attorney can help you navigate through them.
Conclusion
Tax evasion is a serious crime, and the IRS doesn’t take it lightly. If you’re facing tax issues, you need to know your options. Whether you’ve made an honest mistake or something more serious is happening, I can help you navigate through the process and protect your rights.
Don’t wait until the IRS comes knocking.
Schedule a consultation today to get the help you need before things escalate.
