Tax evasion refers to attempts by individuals, corporations or trusts to avoid paying the total amount of taxes owed through
illegal means, known as tax evasion
fraud. This may include underreporting income, misrepresenting deductions, offshore tax
evasion strategies, or or
failing to file returns in a timely manner. Tax evasion
penalties can have serious repercussions. The government imposes serious tax evasion sentence and penalties on offenders, including
prison terms and hefty fines, for tax evasion.
Cost of Tax Evasion
The U.S. government estimates that approximately 3 percent of taxpayers do not file tax returns at all. While not filing taxes
can involve both civil and criminal penalties, these are usually related to the amount of tax owed. For example, if a taxpayer does not owe any taxes, the penalties for not filing are less serious. However, failing to file a tax return for a year in which you do owe taxes is
a crime. For each year a taxpayer does not file a return, the penalty can include
a fine of up to $25,000 and a prison sentence of up to one year.
If the IRS can demonstrate that the individual or company willfully did not file in an attempt to evade taxation, the
IRS can pursue a felony conviction, which could include a fine of up to $100,000 and a maximum prison sentence of five years.
Although
incarceration is rare, the threat is very real. Therefore, the best course of action is to file an accurate tax return on time every year. This is true even if you donÂ’t have the money to pay the entire tax bill. In these cases, the
IRS will work with you to set up a payment plan. If you need for more time to prepare an accurate tax return, such as owing to insufficient records, you can request an extension of time to file.
If individuals or corporations file tax returns late, the
IRS can levy a penalty or a “late filing fee” of 5 percent for every month the return is late up to a maximum of 25 percent of the total tax due. However, the IRS usually does not pursue criminal charges against taxpayers who file their tax returns late. It also tends to extend more sympathetic treatment in collecting taxes to those who file on their own before the IRS “catches up with them.”
Even if you have not filed taxes for many years, it is best to file missing returns late. The IRS computers do not automatically search for a taxpayerÂ’s history, and the IRS wants to encourage non-filers to begin filing taxes.
Penalties for Tax Evasion | Lawfirms.com