White Collar Crimes: Tax Evasion

Brian Zeiger, LLC | April 3, 2016 | White Collar Crimes

Tax evasion is when a person or a company purposefully underpays its taxes. Below are some examples of tax evasion and ways people evade taxes. By being aware of common methods of tax evasion, you can avoid mistakes that could cost you in the future.

What is considered tax fraud

Tax forms are long, the Internal Revenue Code is complicated, and unless you’re an accountant or other tax professional, you are bound to make some mistakes. Although you should always try to fill out your tax forms correctly, there’s no need to worry about being convicted for tax evasion over a simple error. In order to be convicted of tax evasion, the IRS must show that you deliberately tried to underpay your taxes. If you simply made an error, you’ll still have to pay what you should have paid, and possibly an additional fine, but you’ll avoid the time, expense, and penalties of a criminal trial.

How taxes are calculated

Every year, Americans must file a return stating how much money they made, how big their families are, and what their expenses were. The IRS then calculates each family’s total income and subtracts certain expenses, called “deductions,” in order to determine their adjusted gross income, or AGI. The service then uses a chart to determine what percentage of your AGI to tax, and comes up with a number representing the taxes you should owe.

Finally, the IRS looks to see if there were any special circumstances that mean you should pay less taxes, and then reduces the amount you owe by applying “credits.” Congress often uses these credits to motivate people to make changes in the way they live. For example, credits may be available to homeowners who make substantial improvements in order to make their homes energy efficient, or to businesses that hire people with criminal backgrounds.

Examples of tax evasion

If someone fails to file his or her tax return, the IRS has no way of auditing the person’s finances. One of the most common forms of tax evasion involves underreporting income. Businesses and employees who deal largely in cash, such as wait staff, hairdressers, and retail store owners, sometimes underreport income because there’s little in the way of a paper trail. Businesses sometimes inflate their expenses, and families occasionally overstate the size of the household in order to take larger deductions. Finally, people take advantage of the current credit system by misrepresenting their circumstances. If the IRS suspects you of any of these activities, it will launch an investigation and may prosecute you for tax fraud.

Fraud or Negligence?

Auditors are trained to look for tax fraud, which would include using a false Social Security number, keeping two sets of financial books, or claiming a blind spouse as a dependent when you are single are all examples of tax fraud. However, auditors know the tax law is complex and expect to find a few errors in every tax return. A careless mistake on your tax return might tack on a 20% penalty to your tax bill. While not good, this sure beats the cost of tax fraud — a 75% civil penalty. The line between negligence and fraud is not always clear, however, even to the IRS and the courts.

Contact Brian Zeiger

An experienced criminal defense attorney can help you determine whether you have any grounds for dismissal of the charges, explore plea options, or represent you at trial. Only someone familiar with the criminal court system and cases like yours will know how good your chances are for a favorable outcome. A knowledgeable attorney will take all of this into consideration, assist you in making decisions about your case, and protect your rights.

If you or someone you know has been charged with tax evasion, it is critical to have an experienced attorney advocating on your behalf. Brian Zeiger is an experienced criminal defense attorney who will vigorously defend your rights. Contact The Zeiger Firm today at (215) 546-0340 for a consultation, and let us help you.

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