- Tax evasion is the willful commission of an affirmative act intended to evade taxes. Any action engaging in conduct intended to mislead the IRS or conceal monies from the IRS is considered tax evasion. Examples of tax evasion include filing a false return, submitting false documents, aiding in the preparation of a false return and interfering with the administration of tax law.
- Each requirement imposed by the IRS, whether it be the requirement to file on time or pay on time, is enforced by a corresponding penalty. Those penalties (and the resulting interest) as well any unpaid tax are owed to the government upon infraction. However, the infractions have varied statutes of limitations. Under normal circumstances, the IRS is allowed 10 years to take enforcement action against taxpayers to collect back taxes owed. However, the statute for collection of tax differs from the statute for tax evasion.
- The statute of limitations for the prosecution of criminal tax evasion is six years. The statute of limitations begins to run from the date of the last act of evasion or the due date of the return, whichever is later. If the tax evasion is based on the filing of a false return, the statute will begin from the date the return was filed. If the evasion is based on the taxpayer refusing to file a return, the statute will begin when the return was due.
- In most cases, there is a three-year rule regarding the assessment of tax owed. However, the assessment period for cases of tax evasion is six years.
- A conviction for tax evasion could result in a fine of $250,000 for individuals and $500,000 for corporations. There may also be civil fraud penalties associated with a taxpayer's willful evasion of tax. The decision of whether to prosecute is based upon evidence of the taxpayer's intent. The government will need to prove that the taxpayer's behavior was not based on some form of negligence as opposed to fraud in order to move forward with a prosecution.