What Is Tax Evasion, and How Is It Different From Fraud?
Did you know that the famous gangster Al Capone’s longest sentence was for tax evasion? He served seven years, six months, and fifteen days.
Tax crimes are more serious than they appear to be and definitely not crimes worth committing. However, they are also hard to understand, making it hard to tell if you should be concerned.
This begs the question- what is tax evasion?
If you don’t know, worry not. We have all the information you need, from information on tax avoidance vs evasion to tax evasion penalties. To learn more, simply read on!
What Is Tax Evasion?
Tax evasion is defined by the IRS as a failure to pay taxes or a deliberate attempt to underpay taxes. To establish tax evasion, the government has to prove there was a willful act to avoid making payments, and that payment is still owed.
Tax avoidance, on the other hand, is an action taken to lessen liability and maximize income post taxes.
These two might sound similar in name, but tax evasion is highly illegal. Tax avoidance, on the other hand, involves the use of legal tactics such as claiming deductions or tax credits.
You don’t want to mix these two up- doing something illegal doesn’t mean you’re using sanctioned tax avoidance; it means you’re committing a crime.
What Is Tax Fraud?
Tax fraud is an attempt to defraud the United States Government by intentionally failing to pay your true tax liability.
It can include failing to report income, creating false documents, or intentionally giving your tax preparer the wrong information.
Tax fraud does not include accidentally forgetting to pay your taxes by Tax Day, or giving your tax preparer the wrong information on accident.
This may sound similar to tax evasion. That’s due to the fact that tax evasion falls within the umbrella of tax fraud.
Tax evasion is considered a more “serious” tax crime as a result. The tax evasion penalties also tend to be more harsh than those for tax fraud.
What Happens if You’re Audited?
When you are selected for a tax audit, it doesn’t necessarily mean there is any suspicion of you committing tax crimes.
The IRS often randomly selects those who it audits using a computer program. You could also come up for an audit if they select someone you do business with.
Keep in mind that the IRS will only identify you of audits through mail, and they don’t initiate audits over the phone.
If you are being audited, there’s no need to fear. Attorneys trained specifically in this area are available to help you.
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