Are You Avoiding or Evading Your Taxes?
If you haven’t filed and/or paid your federal taxes in a few years, you’re not alone.
Many individual taxpayers face hardships such as job loss, illness, divorce and other circumstances that make it frightening to file and exceedingly difficult to pay taxes. The fear can be so overwhelming that many people will put off dealing with their delinquent taxes for years. That’s known as “avoiding.”
According to the Internal Revenue Manual, it is not criminal or fraudulent to reduce, avoid, or minimize personal income tax by legitimate means. In other words, avoidance is acceptable, but evasion is not. However, with all of the rules and exceptions at play in the federal tax code, knowing the difference between the two isn’t always easy.
Serious But Not Criminal
In my experience, most of the people who come to me for help with IRS troubles don’t pay their taxes or don’t file due to life challenges and are not engaged in criminal or fraudulent behavior. Not filing your tax returns is very serious business. However, not being able to pay your taxes is not a criminal offense.
When you avoid taxes, you do not conceal, misrepresent, or make things appear different than they are. Making a mistake is not criminal either. It’s a matter of whether you intentionally do something fraudulent. If the IRS determines that your behavior was intentional and criminal, you may find yourself paying a fine or, in the worse case, spending time in jail.
The IRS estimates that only a small percentage of tax crime convictions –representing just .0022 percent of taxpayers – occur in a year. Yet the IRS also estimates that 17 percent of taxpayers fail to comply with the tax code in some way. The IRS also says that it is individual taxpayers, rather than corporations, that commit 75 percent of income tax fraud. So, it’s important to know the difference between avoiding and evading.
Acts the IRS Considers Intentionally Criminal
Although the following list is not all-inclusive, it gives a number of common examples of taxpayer behavior that the IRS considers intentionally fraudulent or criminal
•Deliberately underreporting income
•Taking payments in cash and failing to deposit them in order to avoid tax consequences
•Inflating the value of business expenses
•Creating false business expenses for tax purposes
•Using a false social security number
•Keeping two sets of financial records for your business
•Claiming an exemption for a spouse when you are single
•Claiming an exemption for a dependent whom you never supported
•Destroying your books to conceal tax evasion
•Creating false checks or receipts to support deductions that don’t exist or denying that deposits in your accounts are income when they are
•Concealing financial accounts from the IRS
•Transferring assets to conceal them from the IRS
•Reporting personal expenses as business expenses
•Claiming more charitable deductions than were made
•Failing to file returns even if you make a substantial amount of income
•Making false statements to the IRS under oath
•Failing to file returns despite having been contacted in prior years by the IRS for failing to file
Making Amends with The IRS
Being in debt to the IRS is not a circumstance I would wish on anyone. It is the cause of great stress and often leads to great loss and hardships and even to the break up of families. The IRS is not unreasonable when individuals make efforts to be responsible. No matter what your circumstances, seek counsel with a law firm that specializes in helping taxpayers solve their IRS problems. We’ve helped hundreds of people just like you get their lives back on track and eliminate the stress of owing the IRS. Give us a call and let’s see how we can help you.