What is Tax Evasion?

Tax evasion refers to the illegal act of deliberately avoiding paying taxes owed to the government. It involves the intentional misrepresentation or concealment of income, assets, deductions, or other financial information in order to reduce tax liability or evade taxation altogether. Tax evasion can apply to either state or federal taxes and is subject to penalties and legal consequences.

These crimes can be charged at the state and federal levels. It is also possible to be charged at both state and federal levels for the same crime.

State Tax Evasion:

State tax evasion refers to the illegal act of deliberately avoiding or evading the payment of state taxes that are legally owed by an individual or business entity to a particular state government. State taxes are typically imposed on various sources of income, such as wages, business profits, property, sales, and use of certain goods and services.

Tax evasion involves the deliberate misrepresentation or concealment of income, assets, deductions, or other financial information in order to reduce the amount of taxes owed or to avoid paying taxes altogether. Some common methods of state tax evasion include underreporting income, inflating deductions, maintaining false records, engaging in cash transactions to conceal income, or transferring assets to evade tax liability.

State tax evasion is considered illegal and is subject to penalties and legal consequences. Each state has its own tax laws, enforcement agencies, and penalties for tax evasion. These penalties may include fines, interest on unpaid taxes, civil penalties, criminal charges, imprisonment, or a combination of these.

It’s important to note that tax evasion is different from tax avoidance, which refers to the legal and legitimate use of tax planning strategies to minimize tax liability. Tax avoidance involves using available loopholes, deductions, exemptions, and credits within the framework of the law to reduce tax obligations. Tax evasion, on the other hand, involves deliberate illegal activities to evade paying taxes owed.

State Penalties Can Include:

The penalties for state tax evasion vary depending on the jurisdiction and the specific circumstances of the case. However, in general, this is considered a serious offense and can result in both civil and criminal penalties. Here are some common penalties that can be imposed for state tax evasion:

Civil Penalties – Taxpayers who are found responsible for evading state taxes may be subject to various civil penalties, which can include:

• a. Fines and interest: Tax authorities may impose fines on top of the taxes owed. These fines can be a percentage of the unpaid tax amount and may accrue interest over time.
• b. Penalties for late payment: If the taxes are not paid by the specified due date, additional penalties may be imposed for late payment.
• c. Penalties for underpayment or failure to file: Taxpayers who underreport their income or fail to file tax returns may face penalties based on the amount of tax owed.
• d. Loss of deductions and credits: Tax evasion can result in the disqualification of certain deductions and credits, further increasing the tax liability.

Criminal Penalties – In more severe cases, tax evasion can be treated as a criminal offense. Criminal penalties for state tax evasion can include:

• a. Imprisonment: Individuals convicted of tax evasion may face jail or prison sentences. The length of the sentence depends on the severity of the offense and the applicable state laws.
• b. Fines: Criminal tax evasion can result in substantial fines, often proportionate to the amount of tax evaded.
• c. Probation: Instead of Imprisonment, a court may impose probation, which typically includes supervision and specific conditions that must be met.
• d. Asset Forfeiture: In certain cases, authorities may seize assets that were used in the commission of the tax evasion or purchased with the proceeds of tax evasion.

It’s important to note that tax laws and penalties can vary significantly among states. The specific penalties for this crime will depend on the laws of the state in question and the individual circumstances of the case.

Federal Tax Evasion:

Federal tax evasion refers to the illegal act of intentionally evading or avoiding the payment of taxes owed to the federal government. It involves deliberate actions taken by individuals or businesses to conceal, misrepresent, or underreport their income, assets, deductions, or other financial information in order to reduce their tax liability.

Examples of Federal Tax Evasion Can Include:

Underreporting Income – Failing to report all or a portion of income earned, such as cash payments or offshore income.

Overstating Deductions – Inflating or fabricating deductions, expenses, or business costs to reduce taxable income.

Hiding Assets – Concealing assets, such as money, property, or investments, to avoid taxation or prevent them from being seized for tax liabilities.

Offshore Tax Evasion – Illegally sheltering income or assets in offshore accounts or jurisdictions to avoid taxation.

Falsifying Records – Creating false or fraudulent documents, invoices, or financial statements to misrepresent financial transactions or hide taxable income.

Engaging in Illegal Tax Shelters – Participating in illegal tax shelters or fraudulent schemes designed to artificially reduce tax liability.

Identity Theft – Using stolen identities or false identities to evade taxes or fraudulently claim tax refunds.

It’s important to note that tax evasion is considered a serious crime and can result in significant penalties, including fines, imprisonment, and the assessment of back taxes, along with potential damage to an individual or company’s reputation.
Tax evasion is different from legal tax avoidance, which involves using lawful strategies to minimize tax obligations within the framework of the tax laws. Tax evasion, on the other hand, involves deliberate and illegal actions to evade paying taxes that are owed.

Federal Penalties Can Include:

The penalties for federal tax evasion can vary depending on the specific circumstances of the case. However, here are some potential penalties that may apply:

Criminal Penalties – Tax evasion is a federal crime, and if convicted, individuals may face criminal penalties, including fines and imprisonment. The maximum penalties for this crime can be severe, with fines reaching up to $250,000 for individuals and up to $500,000 for corporations. Additionally, individuals may face imprisonment for many years.

Civil Penalties – In addition to criminal penalties, the Internal Revenue Service (IRS) can impose civil penalties for tax evasion. Civil penalties are typically monetary fines based on the amount of tax owed. The specific amount can vary depending on the severity of the evasion and the circumstances surrounding the case.

Interest and Late Payment Penalties – If tax evasion leads to an underpayment of taxes, the IRS can also impose interest and late payment penalties on the unpaid amount. These penalties are typically calculated as a percentage of the unpaid taxes and accrue interest over time.

What Does a Tax Evasion Criminal Defense Attorney Do?

A tax evasion criminal defense attorney has extensive experience in representing individuals or businesses accused of evading taxes. Tax evasion is a serious offense involving the deliberate underpayment or nonpayment of taxes owed to the government. This can be the state and or federal government. A criminal defense attorney in this field has expertise and experience in tax law and works to protect the rights and interests of their clients throughout the legal process.

Key Responsibilities of a Tax Evasion Criminal Defense Attorney:

Legal Counsel and Advice – The attorney provides legal guidance to their clients, explaining the charges against them, their rights, and potential legal strategies. They assess the strength of the prosecution’s case and advise on the best course of action.

Investigation and Evidence Gathering – The defense attorney investigates the circumstances surrounding the tax evasion allegations. They gather evidence, review financial records, examine tax returns, and analyze documentation to build a strong defense.

Negotiations with Tax Authorities – In some cases, the attorney may engage in negotiations with tax authorities, such as the Internal Revenue Service (IRS) in the United States. They may aim to reach a settlement, reduce penalties, or negotiate a plea agreement if it is in the client’s best interest.

Building a Defense Strategy – Based on their analysis of the case, the attorney develops a defense strategy tailored to the specific situation. This may involve challenging the evidence presented by the prosecution, demonstrating a lack of intent, or questioning the legality of the tax assessment.

Representing the Client in Court – If the case goes to trial, the defense attorney will represent the client in court. They present arguments, cross-examine witnesses, and strive to cast doubt on the prosecution’s case. They may also call upon expert witnesses, such as forensic accountants or tax professionals, to support the defense.

Plea Bargaining – In situations where a trial is not the best option or the evidence against the client is overwhelming, the defense attorney may negotiate a plea bargain with the prosecution. This involves reaching an agreement on reduced charges or penalties in exchange for a guilty plea.

Compliance and Mitigation – After the legal proceedings, the defense attorney may work with the client to ensure future tax compliance. They can provide guidance on fulfilling tax obligations, avoiding potential pitfalls, and mitigating any penalties or consequences.

It’s important to note that tax laws and procedures can vary from one jurisdiction to another and between state and federal laws, so the exact role and responsibilities of a criminal defense attorney may differ depending on the legal system in question.

The lawyers at The Attorneys For Freedom Law Firm have been representing people charged with federal tax crimes for over 3 decades. Our attorneys have the experience and knowledge to provide the best possible defense of these charges. We have experience representing clients charged with federal tax offenses at trial.

To schedule a Strategy Session with an experienced criminal defense attorney, contact the Attorneys For Freedom today. We can be reached online at AttorneysForFreedom.com or by calling our Arizona office at 480-755-7110 or our Hawai’i office at 808-647-2423.