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What Are the Penalties for Tax Evasion

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When taxpayers deliberately misrepresent or conceal their true income and/or tax debt, this is called tax evasion and it is a serious crime, punishable by law. Penalties for tax evasion generally address illegal actions such as failing to report income, misrepresenting deductions, or failing to file a return at all.

A taxpayer can be found guilty of tax evasion when it is determined beyond a reasonable doubt that the defendant owed substantial additional income tax and willingly attempt to evade that tax debt. Penalties for tax evasion are severe and often include hefty fines or even a prison term. The three types of tax evasion that are most commonly pursued by the IRS are as follows:

  1. Tax evasion: This is the broadest category for tax crimes and also the most serious in terms of penalties for tax evasion. This is considered to be an intentional violation of tax laws. A felony conviction for tax evasion can carry with it fines up to $100,000 and up to a 5-year prison sentence.
  2. Filing a false return: When a taxpayer is audited due to random chance or a red flag, if an error is discovered the IRS will typically just increase the amount of the tax debt, taking into consideration late fees and interest. But if it’s discovered that the omission was intentional, this is again considered a felony crime. Penalties for filing a false return in this case can result in fines of up to $100,000 and a maximum prison sentence of 3 years.
  3. Failure to file: Failing to file a claim in a year when you owe taxes to the government is considered a misdemeanor crime. For every year a return isn’t filed, potential penalties for tax evasion include a fine of up to $25,000 and a prison sentence of up to a year. If the IRS can prove that the failure to file was intentional, it can pursue a felony conviction in which the fine can go up to $100,000 and the maximum prison sentence is 5 years.

Once charged with any of these penalties for tax evasion, a taxpayer will be arrested and either required to post bail or be released on his or her own recognizance. At that point, it’s advisable to contact a tax attorney. In all likelihood, the IRS has spent time investigating the case and has probably built up a pretty solid case. A good tax attorney can be essential in getting the taxpayer through the legal process. After all, penalties for tax evasion are meant to be deterrents and they should be, considering the consequences they bear.

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