FAQ About Taxes and Tax Evasion Penalties |
Posted: April 25, 2019 |
The IRS collects a whopping 3.4 trillion dollars from US taxpayers every single year. While that number may seem enormous, it doesn't even scratch the surface of what the IRS is owed. The cause of that discrepancy? Tax evasion. Tax evasion is an offense committed by thousands of people every year both wittingly and unwittingly. If you fear that you may have committed tax evasion and want to know more about what exactly evasion constitutes and how to manage the fallout, this article is for you. Continue reading this article as we discuss frequently asked tax evasion penalties and other pressing matters. What is Tax Evasion? Tax evasion is defined as the illegal nonpayment or underpayment of one's taxes. Tax evasion is typically used to describe the willful avoidance of taxes, however, it is also sometimes used to describe those that are unknowingly in violation of their tax burdens. Here's a quick example to better illustrate what willful vs unknowing evasion looks like. John and Jane both have to pay taxes this year. Both of them had an IRA retirement account that they converted to a ROTH IRA. That conversion means that both need to pay income taxes on that money. John is aware that he needs to pay taxes on the money but decides that he doesn't want to. When his investing company sends him a 1099-R outlining what he owes in taxes, he throws it away. Jane is unaware that she has to pay taxes and what's worse is that Jane moved recently and didn't update her address with her investment group. When they send Jane her 1099-R, she never receives it and files taxes without reporting her converted income. The IRS receives a copy of both John and Jane's 1099-R and may choose to audit one or both of them for potential tax evasion. In the above examples, Jane could prove to an auditor that the 1099-R was sent to the wrong address and will then be able to pay back taxes with nominal penalties. John on the other hand may get caught for willful evasion and could face serious trouble. Is Tax Evasion Illegal? Yes. Tax evasion is illegal on both the state and federal level. As we described in the previous point, intent matters when evading taxes. If your intent is to willfully skirt your tax obligations, you can face steeper trouble that if you can prove ignorance. The issue is that proving intent can be difficult and, depending on your auditor, you may be tried as a willful evader even if you're not. Is Tax Evasion and Tax Fraud the Same Thing? Yes. These two terms are often used interchangeably but always describe one of the following actions:
You may have also heard of the term tax negligence. Negligence is the term that's most commonly used to describe unwittingly making mistakes on your taxes. It's important that you ask people using these terms for context on their meaning because they are often spoken in place of one another. Can You Go to Jail for Tax Evasion? Tax evasion penalties are often federal crimes and you can go to jail for up to 5-years for them. In addition to steep jail time, evading taxes could result in fines as high as $250,000. That fine will come in addition to any back taxes that you owe the IRS. What is an IRS Levy? One of the IRS' most powerful weapons when it comes to tax evasion penalties is a bank account levy. A levy is a siphon that the government can place into your account through which they will take, on a monthly basis, portions of what you owe. The IRS does not need you or your bank's permission to place a levy on your account. Try this service or others to help you remove a levy if you're actively managing one. Is Concealing Non-Primary Income Tax Fraud? Yes. Concealing any sort of income from the IRS is a form of fraud. This has become a hot question in the age of side-hustles. Lots of people working gigs like ride-sharing and similar jobs feel that reporting the extra $5000.00 or so they made promoting products on social media isn't worth their or the IRS' time. That suspicion is wrong and can get you into trouble. As a general rule, expect to let the IRS know about all the money that you've made over the course of the year. Chances are the person paying you has reported what they paid to the IRS so the IRS will know if there's a discrepancy between you and your employer. How to Deal With Tax Fraud and How to Avoid It If you're already getting audited and worry that getting charged with tax fraud is a possibility. It's important that you seek professional legal help from firms that specialize in this subject matter. As with all things, prevention is the best cure, so when preparing your tax forms, always lean on the expertise of a trained accounting professional to ensure that mistakes are few and far between. Wrapping Up FAQ About Taxes and Tax Evasion Penalties Now that you better understand tax evasion penalties and other important tax facts, we hope that you feel compelled to be honest about your tax dealings and do your best to always file honest returns. After all, failure to do so could result in problems that far exceed the benefits of under-reporting a few thousand dollars. If you're running a business and are looking for a place to advertise, look no further than Store Board! Store Board is a social networking site made specifically for businesses. Get set up on the platform by clicking here!
|
||||||||||||||
|