It may seem like the perfect plan. After all, the government has so many people to keep track of, right? Would they really know if you didn’t pay your taxes at the end of the year, or if you lied on the documents so you could pay a little less?
Tax evasion is a scheme that, unfortunately, many people think that they can get away with, says Henry Wade of The Wade Law Firm in Texas. But, regardless of how long you think you are in the clear, it is a federal crime you can be convicted of a federal crime. Here, Wade provides a few common scenarios of tax evasion.
- Failing to pay your taxes altogether. If you have a job or own a home, it is required by law that you pay taxes on your property and your income. Most of the time you will be sent a letter requesting a specific amount, or you may have the taxes automatically withdrawn from your paycheck. In the first few months of the new year, it is then your responsibility to file your taxes using specified forms and send them to the government. It is a standard practice that millions of people comply with every year, without hesitation.
- Taking deductions off your taxes that are false, with criminal intent. In an attempt to get more money back from the government, or to avoid having to pay significant amounts of money, people may claim that they put forth money for expense that would qualify them for a deduction. Possible examples include traveling for business purposes, charity donations and educational expenses. If however, in reality you did not put forth money for the items you are claiming, then you may be audited, and asked to produce the correct paperwork to prove the authenticity of the expenses.
- Creating fake invoices. Invoices are a standard form of paperwork kept by businesses to document money owed or paid for the completion of services or deliveries. In order to avoid having to pay all the taxes, business owners may produce invoices that suggest a job was completed for a price much less than actually true. That way, more money can go straight into their pocket, instead of being taxed.
Under Investigation
When the IRS suspects that you are trying to evade part of, or your entire, obligation to pay taxes, they will start investigating you. Many times, says Wade, it will be months before you even realize, or are informed, that you are being investigated. So, you may think you are getting away with the operation, says Wade, but the IRS is just silently waiting for you to make your next move.
Auditing
Being charged with tax evasion comes at the conclusion of an audit. The IRS conducts a few random audits every year, but most are done to pinpoint individuals and businesses whom they suspect are misrepresenting their income to the government. Auditors will request that they come into your home or place of business to conduct a more thorough investigation. Agents will ask to look through all your invoices and accounts and compare them to what you have claimed on your tax forms. They will also make steps to put a plan in place that involve you paying any taxes that you have failed to file in previous years.
Being prosecuted for tax evasion can carry serious repercussions. The federal government is strict with enforcing tax regulations, and if convicted, you can face prison time and heavy fines. A lawyer who specializes in the field should be contacted immediately if you feel you are under investigation by the IRS or have been contacted for an audit.
