What do you do if you receive a notice stating that a revenue officer is investigating your file for probable tax evasion? What will be the first steps to take and who will you turn to for legal advice?
Tax Evasion is any attempt to avoid payment of taxes owed to the state through the use of illegal means or methodologies. It is acceptable and even encouraged when individuals take lawful actions to lessen their tax liability. Actions such as tax deductions and even contributions to charity for deduction purposes are encouraged. However, once a person uses illegal and unlawful strategies just to avoid tax payment, the consequences are meted out to fit the crime.
A common form of tax evasion is under reporting income. There are instances where businesses and employees who earn huge amounts of cash, underreport their income and inflate their expenses to cover the truth of how much is really being profited. Families occasionally overstate the size of the household to avail larger deductions and other people misrepresent their circumstances to have a greater edge in the credit system. In all these cases, once the IRS suspects or even attains a little amount of evidence that one is involved in committing such offenses, it will open up an investigation to finally prosecute the tax evader for tax fraud.
The most committed types of tax evasion are the habit of not reporting cash income, reporting less than actual income, hiding money in overseas accounts and improperly claiming tax deductions. Taking unauthorized deductions for personal expenses on a business tax return or falsely claiming charitable deductions are forms of tax evasions as well. Other types include filing a false tax return, removing property from the list of real estate ownership, under reporting an estate’s value and overestimating the value of property donated to charity. Moreover, corporations are also committing tax evasion by paying employees in cash and not filing the proper returns.
The IRS Plays the Role of an Investigator
This is not to scare the reader, but to inform you of the process taken once a violation has been intentionally or unintentionally committed and to provide the necessary remedies to the solution of the consequences of tax evasion.
Upon proof of criminal and fraudulent acts being committed by the taxpayer, the IRS then informs the taxpayer of suspected criminal behavior with a letter, phone call or personal visit and an IRS agent can even provide penalties immediately or assign the Criminal Investigation Division, CID, to begin the investigative research. The CID will then conduct a detailed investigation and will further work on a deeper background investigation by calling and visiting friends, employers, co-workers, neighbors and the spouse of the suspected tax offender. In order to prove the guilt of the violator during prosecution, the facts presented must declare that the defendant owed substantial income tax beyond what was declared on the tax return and the defendant knowingly and intentionally, with bad faith, planned to defeat or evade the tax.
Legal Actions against Tax Evasion;
Exhaustion of All Avenues of Solution
The criminal charges to follow are: Tax evasion which is a broad category that includes any cheating on taxes owed to the government. This felonious act can result in up to a five-year prison sentence and/or fines up to $250,000 ($500,000 for corporations). Filing a false return is when a taxpayer has passed false or misleading information on the tax return and presents it as a fact. This is also categorized as a felony and can carry a punishment of up to a three-year prison sentence and/or up to $250,000 in fines ($500,000 for corporations). The least of all these offenses is not filing a return, which carries a maximum of one year in prison and/or fines totaling up to $100,000 ($200,000 for corporations). You will be strictly punished to pay the taxes plus the legal fines provided.
Solutions to Lighten the Penalties Meted against the Taxpayer
In certain cases when the taxpayer voluntarily presents himself and files amended tax returns of their own volition and starts to pay the debts incurred, then the IRS usually does not pursue legal actions which would sometimes result in criminal charges. The IRS then grants the opportunity for the delinquent taxpayer to make amends and assists the individual to put an end to the problem at hand provided that the person is in good faith to help the IRS collect all liabilities to be paid.
Prevention is better than a Cure
Now that we already know the consequences arising from Tax evasion, and how the law defines it as a crime, the next step is to take precaution and preventive measures to avoid the crime by consistently following the rules and the laws. In case you are unable to file on time, you may request an extension from the IRS. It is best to pay on this debt as quickly as possible if you still owe taxes from past years. It is also a must that if you have not filed taxes in years, it is essentially smart to begin filing now, before the IRS discovers the delinquency.
If you receive a notice from the IRS that you will be audited, contact DANIEL P VIGILANTE CPA & PROFIT CONSULTANTS, for professional tax advice and information. The IRS is no joke, therefore, it is always good to have a tax consultant on your side when you face them.
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