Attempts to push the limits of federal tax law to lower the taxes owed to the United States government are not uncommon. In many cases, going too far can result in heavy civil financial penalties being imposed by the Internal Revenue Service. However, there are also instances where attempting to avoid a tax liability becomes the crime of tax evasion. Tax evasion is considered a federal felony offense and is punishable by a fine of up to $250,000 fine and five years in prison.
What is Tax Evasion?
The law for tax evasion is established in 26 U.S.C. § 7201 and applies to any person who willfully attempts in any manner to evade or defeat any tax or payment of tax imposed by the Internal Revenue Service Code. Enforcement of the tax evasion law has lead to two different offenses for tax evasion: evasion of the assessment of a tax and evasion of the payment of a tax.
Evasion of the Assessment of a Tax
The best and most common example of the evasion of the assessment of a tax is the filing of a false income tax return. If the false return does not report income or takes deductions that are not allowed, then it can be considered an attempt to evade the assessment of taxes that are owed. The courts have established that a taxpayer must make an affirmative act in an attempt to evade the assessment of a tax, so the filing of a false income tax return could lead to charges but the failure to file an income tax return is not tax evasion.
Evasion of the Payment of a Tax
Once it is established that a tax is owed, taking action to avoid payment of that tax is also considered tax evasion. Similar to the evasion of the assessment of a tax, an affirmative act must be taken to avoid the payment for it to be considered a crime. Refusing to pay your federal income tax will lead to severe fines and civil penalties from the IRS, but it would not lead to charges of tax evasion. However, if you do not pay your federal income taxes and conceal your assets in the name of a friend or family member to keep that money from being seized by the IRS then you could end up facing tax evasion charges.
The wording of the statute for tax evasion is very broad, making it a crime to attempt to evade any tax in any manner. The courts have ruled that the broad definition means tax evasion charges can also be brought against people other than the taxpayer for their role in evading the taxpayer’s tax liabilities.
Requirement of Willfulness
The federal tax code is massive and can be confusing even for tax professionals. Because an act must be willful to be a crime, this means that honest mistakes made in filing your tax returns are not grounds for tax evasion charges. A willful act has been defined by the courts as the “voluntary, intentional violation of a known legal duty.” A defendant’s good faith belief that they were not violating tax laws is a defense to tax evasion charges, even if that person’s belief seems unreasonable. For example, if you do some of your work from home and took an incorrect tax deduction for a home office it would only be considered tax evasion if you knew that you had not met the IRS standards for a home office and took the deduction anyway. If you believed in good faith that you qualified for the deduction you may still face civil fines and penalties from the IRS but you would not be subject to tax evasion charges.
Let a Federal Ohio Criminal Defense Lawyer Help
The Internal Revenue Service Code is extremely complex, which makes it easy to commit errors while filing and paying your taxes. Those errors could lead to tax evasion charges, but if you were not willfully acting to avoid your taxes then you have a strong defense. You will want an experienced attorney on your side who can present that defense effectively. The Ohio federal criminal defense lawyers at Luftman, Heck & Associates have years of experience handling federal cases and reaching the best possible outcomes for our clients.
Facing federal criminal charges? Contact us.
If you have been charged with a federal crime, you’re probably wondering what your options are. The Ohio federal criminal defense lawyers at Luftman, Heck & Associates have years of experience handling these types of cases and winning optimal outcomes for our clients. Call an Ohio federal crime lawyer for a free consultation at (614) 304-3398 or email us via [email protected].