You’ve probably heard of this term used in movies and television, but perhaps you don’t know anyone who had experienced it. That’s good -tax evasion is a serious crime- but what most people do not realize is that it’s much more common than people think.
What is tax evasion?
Tax evasion is when a person or entity (business) avoids paying taxes on purpose through illegal means. What’s critical here is to understand the difference between avoiding paying taxes via legal means, which is allowed, and illegal means, which is not allowed and is a serious crime.
Tax avoidance
In contrast, tax avoidance is a way to minimize a person’s or company’s tax liability—that is, how much tax they owe to the government—which can be done through legal means.
Forms of tax evasion
There are many ways of evading taxes. For example:
- Failing to report income
- Reporting less income than what one made in a year
- Inflating someone’s deductions
- Hiding somebody’s assets
- Creating false transactions
As you can see, all of the above have one thing in common: they are fraudulent activities aimed at minimizing tax liability or avoiding paying taxes entirely.
Penalties
Tax evasion is a serious criminal offense punishable by the government. Penalties for this crime range depending on the place where the crime was committed but they often include significant fines and imprisonment.
Tax evasion is considered an especially heinous act because it undermines the integrity of the United States’ tax system and deprives the states from funds that they need to provide for their citizens. If you have questions about tax evasion or avoidance, do not hesitate to contact a tax attorney.