What is Tax Evasion

Tax evasion can be any of two things: a taxpayer willfully and knowingly attempted to evade or defeat taxes, or a person owes substantial tax in addition to what is stated in his tax return.

Tax evasion is a federal offense because the individual tries to evade paying federal income taxes. A maximum of five years in prison and a fine of $100,000 is the sentence for this crime.

The proof of tax evasion does not have to prove the exact amount of the tax due. It does need to be established that the taxpayer evaded paying tax knowingly and willfully.

Penalties for Tax Evasion

You may be subject to penalties and maybe criminal prosecution for tax evasion. Penalties listed are just a few. There are numerous penalties involved with tax evasion. Also, the

Civil penalties:

• Failure-to-pay penalty can't be above twenty-five per cent of your tax not paid, half of 1% of your unpaid taxes every month or a fraction thereof.
• Failure-to-file penalty is 5% of the unpaid taxes each month or a fraction thereof and cannot be more than twenty-five per cent.
• Information reporting penalties: From $15 to $50, based on how late the information return is filed.
• Accuracy-related penalty is 20% for understatement of income tax, or underpayment due to disregard of rules and negligence.
• Tax penalty for frivolous return: $500 if return shows wrong tax amount or return does not have enough information to determine correct tax.

Criminal penalties:

• Evading taxes
• Intentional failure to file a return
• Supply information
• Settle any tax bill
• Fradulent statements
• Preparing and filing a fraudulent return

These are criminal offences and you can be brought to trial.

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