Many people find legal ways to reduce their tax burden. Even the government encourages taxpayers to take advantage of deductions, credits and tax-deferred retirement accounts. Yet, share of taxes – or paying any whatsoever. If you’re trying to reduce the impact taxes have on your finances, you may have considered them yourself. But understanding tax evasion and its consequences may give you second thoughts.
Defining tax evasion
Tax evasion refers to the nonpayment or underpayment of taxes. The most blatant form of nonpayment is ignoring your taxes altogether. Some people do so to prove a point, while others may face a tax burden that they cannot afford to pay. But if your employer provides you tax forms, the Internal Revenue Service (IRS) can access these and pursue you for nonpayment. Underpaid taxes often stem from people hiding money in offshore accounts. While keeping your assets in a foreign bank is legal, failing to disclose your accounts is not. Unless your offshore assets total less than $10,000, you have the obligation to report them.
The penalties for tax evasion
If you received a tax evasion charge, the consequences are stiff. Failing to file your taxes can lead to up to one year in jail and a fine of up to $100,000. The penalties for illegally reducing your tax bill are even harsher. You will likely receive a prison sentence of at least five years. And you may face a fine of up to $250,000 as well.
Few people enjoy paying a large tax bill. But knowing the legal ways to reduce it can save you from trouble. If you’re charged with tax evasion, working with a criminal defense lawyer can help you move forward from your mistakes.