What Tax Evasion Can Cost You
When you complete your tax return each year and drop it in the mailbox (or submit it electronically), it is easy to feel like you are just one of millions of taxpayers submitting your return somewhat anonymously. After all, the IRS has to process, sort and review returns for each household in the entire country. But, do not fall into the trap of thinking that the IRS will not notice if you misrepresent yourself, or purposefully forget some of your income. The IRS is very good at tracking this sort of thing down, even if it takes them a little while.
Tax evasion is defined as a subset of tax fraud and it is quite serious. It generally involves deliberately misrepresenting taxable income to the IRS. Don’t worry – this is not generally just a minor arithmetic error or accidentally transposing numbers. This is a deliberate act. Some of the most common examples of tax evasion are failing to declare all of your income on your return, purposefully inflating your deductions or expenses, or failing to file your tax return at all in an attempt to avoid the IRS noticing all together. The commonality in these examples is the intention to deceive the IRS. In most cases, this will not work. In fact, it will actually make your tax situation much worse than if you simply communicated to the IRS that you were unable to pay what you owe.
What Are the Penalties for Tax Evasion?
The penalties for tax evasion are severe and the IRS has thousands of tax agents working throughout the year to identify returns that have evidence of tax evasion. After a hearing with the IRS, your case is heard and if the IRS determines that you have committed tax evasion, you could actually be convicted of a crime. A felony conviction of tax evasion can result in up to 5 years in jail in addition to up to $100,000 in penalties. You can also be convicted of less serious but related offences like filing a false return or failing to file a return. Like tax evasion, failing a false return is a felony and can result in up to 3 years in jail and a $100,000 fine. Failing to file a return is a misdemeanor and can carry a sentence of 1 year in prison and a $25,000 fine for each year that you failed to file.
Tax Evasion is Simply Not Worth the Cost
There are simply no circumstances in which the benefits of tax evasion outweigh the consequences. The IRS will not likely miss this on your return and facing jail time and stiff fines are always worse than finding a tax solution that is legal and can work for you. If you are struggling to figure out how to pay your taxes and want help strategizing about negotiating with the IRS for a payment plan (installment agreement) or an offer in compromise, where you actually negotiate to pay less than you owe, you may need to consider seeking professional help. A tax firm like Success Tax Relief can quickly assess your situation and come up with realistic and helpful ways for you to avoid the appearance of tax evasion and file legally. Contact us today to get back on track!