What is Tax Evasion

Tax evasion can be one of 2 things: a taxpayer willfully and knowingly attempted to evade or defeat taxes, or a person owes considerable tax on top of what is declared in his tax return.

With a maximum fine of $100,000 and a jail sentence of 5 years, tax evasion is a federal offense.

No matter what the amount of the tax owed, knowing and willfull evasion of taxes must be shown.

Penalties for Tax Evasion

Possible criminal prosecution and penalties await tax evaders. A few criminal and civil penalties are the following:

Civil penalties:

• Failure-to-file penalty: 5% of the unpaid tax by the deadline for each month or a fraction of a month that the return is late. It cannot be over 25% of your tax.
• Failure-to-pay penalty can’t be above 25% of your unpaid tax, half of 1% of your tax not paid each month or a fraction thereof.
• Tax penalty for frivolous return is $500 if you file a return that has an erroneous amount or doesn’t show sufficient information to determine the correct tax.
• Accuracy-related penalty for underpayment owing to disregard of rules, negligence, or understatement of income tax is 20%.
• Information reporting penalties: From $15 to $50, depending on how late the information return is filed.

Criminal penalties:

• Tax evasion
• Intentional failure to file a return
• Supply information
• Settle any tax debt
• Fraud and false statements
• Filing fraudulent returns

These are criminal felonies and you can be brought to trial.

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