Randolph Law Firm, P.C.

Tax avoidance and tax evasion: There's an important difference

In several of our previous posts from earlier this year, we examined how the IRS strives to distinguish between tax fraud and tax negligence. The first is considered criminal. The second tends to be treated as an error. Both can lead to hefty penalties. Though, while negligence might cost you financially, a conviction for fraud might well include the added consequence of time in prison.

The IRS also attempts to draw a distinction between tax avoidance and tax evasion. There's nothing wrong with a taxpayer trying to avoid paying taxes if the claim is legitimate and supported by records. If the agency accuses you of evading taxes, however, it believes you willfully concealed information or misrepresented facts, and that crosses the line into intentional and criminal behavior.

Telltale evasion behaviors

There are certain behaviors that are likely to trigger a deeper look into your tax situation by the IRS. Logically, if you avoid those actions, you are less likely to find yourself facing an audit. Things agents look for include, but are not limited to:

  • Dodging tax obligations by not depositing cash payments
  • Purposely understating your income
  • Purposely overstating business expenses
  • Declaring personal expenses as business expenses
  • Destroying account ledgers or keeping two sets of books
  • Attempting to use forged receipts or false checks to support deductions
  • Claiming more charitable deductions than you can actually prove
  • Repeatedly ignoring notices from the IRS about failing to file returns
  • Lying under oath to officials

If you can avoid taxes, there's nothing wrong with doing so. Honest mistakes happen and the IRS understands that. But errors will be expected to be addressed and by working with skilled legal counsel you can be confident that you're doing all you can to protect your rights.

Source: FindLaw, "Avoiding Behavior the IRS Considers Criminal or Fraudulent," accessed Oct. 5, 2017

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