Tax evasion is where an individual specifically intends to underreport income or overstate deductions in order to get a tax benefit. It is more than an accounting error, it is more than an oversight. Your actions must demonstrate that you specifically intended to evade the law.
The Difference Between Tax Evasion and Tax Avoidance
Tax evasion is a criminal act.
Tax avoidance is a right. In fact Judge Oliver Wendell Holmes Jr. said that tax avoidance is perfectly legal and that you have the right to structure your affairs to pay the least amount of tax possible.
The different is that with tax evasion you don't structure your affairs for the purposes of tax planning, but rather you underreport your income or overstate your deductions, make false statements on your tax returns in order to evade taxes, and that is a crime.
Tax Evasion Penalties
When you think of penalties, you typically think of civil penalties such as incurring a financial debt. However, tax evasion is itself a crime. As a crime the IRS is interested in punishments that equate to time in jail. So, that means you will do time in a federal penitentiary.
On the civil end, once you are convicted of the crime, then they will also go after you civilly and get the penalties and interest from you that way. So, tax evasion is something that can take a bite out of both your finances and your freedom.
Successful Defense Strategies In Tax Evasion Cases
In these cases the best defense is to show that it was nothing more than an accounting error, a bookkeeping error or an oversight. This can reduce it from the level of criminal down into the civil realm. That takes a lot of time and energy to look at every act to build the case around why you did certain things in order to reduce it from criminal down into civil.
Aggressive Defense Against IRS Tax Evasion Charges
The most important thing is strategy. It's knowing how to set up your case. It's knowing how to structure your documentation in order to show that at no time did you intentionally misrepresent yourself by underreporting income or overstating deductions or that to the best of your knowledge you didn't make any false statements on the tax return. It takes a good strategy and a lot of effort to go into every bookkeeping entry, to talk to employees, suppliers and even customers to build a solid case that can be used to aggressively defend your rights against charges of tax evasion.