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Debunking the Five Common Myths about Tax Evasion
We’ve officially entered tax season. As business and individuals are beginning the process of preparing their taxes, it’s important to talk about some of the legal aspects of taxes, one of the most serious being tax evasion.
Nobody enjoys paying taxes. Some dislike the idea so much they choose to take extreme measures to not pay them at all. There are two ways of dodging taxes, tax avoidance and tax evasion. The difference is that one is legal while the other is not.
Tax avoidance is a way of reducing taxes by taking advantage of tax shelters and deductions, all of which are completely legal. Tax evasion is the act of not paying taxes by not reporting income, not paying taxes owed or reporting expenses that aren’t legally allowed.
Tax evasion is often misunderstood. It isn’t uncommon for someone to commit tax evasion without realizing it, or at least understanding the severity of the offense. To help you understand tax evasion, here are five myths to avoid falling prey to.
Myth #1: Tax Evasion Isn’t a Big Deal
Tax evasion is a big deal, and a very serious offense. In one 10-year span , tax evasion accounted for over $3 trillion. That’s a number the IRS doesn’t take lightly.
According to law, any person who willfully attempts to evade or defeat taxes shall be guilty of a felony and upon conviction shall be imprisoned for no more than 5 years, be fined up to $250,000 for individuals and $500,000 for corporations, or a combination of both.
Myth #2: You Can Avoid Tax Evasion by Filing an Extension
Some people believe that a tax extension is a legal means of avoiding paying taxes. This isn’t the case.
A tax extension is a six-month extension on the due date for filing, not paying, your taxes. It essentially provides a shelter from late filing fees. Taxes due still must be paid by the filing deadline. Failure to pay on time can result in tax evasion penalties and additional interest on your total tax bill.
Myth #3: Minors and Dependents Don’t Need to File a Tax Return
Everyone that has earned income, regardless of age or student status may be required to file a tax return. Individual circumstances will determine if a minor, or young adult, is required to file. It’s critical to speak with a qualified tax professional to determine if filing is necessary. Failure to do so can lead to suspicion of tax evasion.
Myth #4: If You Don’t File They Won’t Know
Your individual tax return isn’t the only source of information on your earned income the IRS has access to. Other resources include employers, banks and other financial records. If the IRS determines you have income to report, they will file a Substitute for Return in your name and begin collection efforts.
Myth #5: If You Aren’t Wealthy You Won’t Get Audited
The IRS doesn’t specifically target one income group in the auditing process. Audited returns are selected at random, or sometimes based on a statistical formula to determine whether an audit should occur. Your tax bracket offers zero protection against a tax evasion audit.
Tax evasion should not be taken lightly. If you’re facing possible tax evasion charges, you need qualified legal representation immediately. If you have questions, or need a consultation, we’re here to help. Contact the experienced defense attorneys at Fitch & Stahle today.
