In the United States of America, Federal tax evasion is defined as the purposeful, illegal attempt to evade the assessment or the payment of a tax imposed by federal law. Conviction of tax evasion may result in fines and imprisonment.
tax evasion: an overview
Tax evasion is using illegal means to avoid paying taxes. Typically, tax evasion schemes involve an individual or corporation misrepresenting their income to the Internal Revenue Service.
Al Capone is likely the most notorious tax evader in history. Although well-known as the king of Chicago gangsters, the federal government couldn't put together any criminal charges that would stick until they nailed Capone for failing to pay taxes.
IRS agents likely are using social media to find tax cheats. (Again, there is little information from the agency about this activity.) Postings on Facebook, Twitter, Instagram, and other sites can reveal lifestyles that don't fit with the amount of income reported on tax returns or with deductions claimed.
Tax evasion is one illegal action made to reduce the tax payments (Franzoni, 1998). This action does not only paralyze the function of government in providing public services (Khuong et al., 2020) but also leads to the sense of injustice for those obediently paying the taxes (Green, 2008) .
The IRS recognizes two different forms of tax evasion: evasion of assessment and evasion of payment. If a person transfers assets to prevent the IRS from determining their true tax liability, they have attempted to evade assessment.
Tax evasion is a serious white collar crime, which can carry jail sentences and hefty fines depending on the facts of the case. It can be prosecuted on the state level or the federal level, depending on which taxes are unpaid.
Tax evasion occurs if taxpayers intentionally do not comply with their tax obligations either through the failure of filling return, misreporting income or overstating expenses, or making a lower payment compared to actual tax despite having the ability to pay tax (Rashid, 2020; Islam et al., 2020).
If you commit tax evasion or tax fraud, the IRS can prosecute you and send you to jail. Generally, most tax crimes carry a maximum five-year prison term and a fine of $100,000. The same conduct which constitutes criminal tax fraud may also be considered civil tax fraud.
Tax evasion, however, is illegal and Chapter XXII of the Income Tax Act, 1961, is clear about penalties. A few examples of tax evasion are, an individual, a firm, or a company intentionally avoiding payments of tax liability, misreporting of income, and willful attempts to evade tax are cases of tax evasion.
Tax evasion means concealing income or information from the HMRC and it's illegal. Tax avoidance means exploiting the system to find ways to reduce how much tax you owe.
Objective: The objective of Tax avoidance is to reduce tax liability by applying the script of law whereas Tax evasion is done to reduce tax liability by exercising unfair means. Tax planning is done to reduce the liability of tax by applying the provision and moral of law.
Tax fraud can be punishable by civil (i.e. money), criminal (i.e. jail time and money) penalties, or both. For example, a taxpayer can commit tax fraud and be punished under 26 USC § 6663 with civil penalties, without actually being charged with criminal tax evasion under Title 26 USC § 7201.
Tax evasion may be committed by individuals or entities, and it can involve complete non-payment of taxes or underpayment of taxes. The crime of federal tax evasion is considered a felony by the IRS tax code and may be punishable by heavy fines and years of jail time.
Taxation is the taking of property without the owner's consent, which makes it the equivalent of theft, with some government as the robber. But unlike normal theft, the perpetrator is the State rather than an individual.
Tax evasion itself can be considered a corrupt activity and corruption can include tax evasion conceptually. In this paper, however, corruption is taken to be a bribe taken by a government official.
Walter Anderson
He was convicted of the largest tax evasion scam in U.S. history for evading more than $200 million in taxes.
Tax evasion is a serious crime that has seen a crackdown from the law in recent years. If found guilty, you could be facing a prison sentence, especially if this is not your first offence. The maximum penalty for tax evasion is seven years or an unlimited fine.
If the IRS determines that you underreported your income, there are two types of tax penalties that can apply. One is the negligence penalty. The other is the penalty for substantial understatement of your tax liability. “Substantial” understatement is defined as understating your tax liability by at least 10 percent.
The taxes commonly evaded include federal and state income taxes and state and regional sales and real estate taxes. Tax evasion deprives government of money needed to carry out laws and initiatives, reduces the effectiveness of government and increases budget deficits.