You may have heard the term “tax evasion” many times without understanding what it means. Tax evasion is a form of fraud in which a taxpayer willfully attempts to deceive the government as to the amount of taxes owed. Businesses, as well as individuals, can perpetrate tax evasion, and it can take many forms.
According to FindLaw, tax evasion can be as simple as preventing the Internal Revenue Service from auditing your finances by failing to file tax forms or as complicated as illegally transferring property to avoid reporting full assets to the IRS. Tax evasion frequently takes the form of underreporting income, that is, reporting less money to the IRS than was actually earned. Due to the lack of a paper trail, it is more difficult for the IRS to detect underreporting by individuals and businesses who deal largely in cash.
The IRS grants deductions to families based on household size; the greater your household size, the higher your deduction will be and the less tax your family will have to pay. Therefore, if you misrepresent your household size to the IRS in order to gain a higher deduction, this is tax evasion. Similarly, if you are a business owner, you can commit tax evasion by inflating the amount of money you spend on business-related expenses in order to gain a higher deduction.
Tax evasion is a serious charge, and the consequences can be severe. However, it is important to note that tax evasion involves a willful intent to defraud the IRS. Therefore, if you make a genuine error when preparing your tax return that results in underpayment, you will not face prosecution for the mistake.
The information in this article is not intended as legal advice but provided for educational purposes only.