There are many ways that the IRS can pursue tax evaders. There are felony charges and misdemeanors. You have every right to be concerned about whether your noncompliance to the tax code is a federal felony. This will impact your ability to earn a living, credit rating and net worth.
The willfulness of the criminal determines whether tax fraud is a crime. Federal felonies can be brought against anyone who knowingly or purposely takes steps to evade the IRS tax law. The IRS almost always pursues civil penalties, which are generally not felonies, if there is no evidence or inference of intent or knowledge on the part the tax evader.
It can be difficult for laymen to determine if your situation falls into one of the two categories. This is why it is often necessary to seek out the help of a dual licensed California Criminal Tax Defense Attorney and CPA. The Tax Law Offices Of David W. Klasing has a team of experienced Tax Attorneys and Certified Public Accountants who can review your case and provide you with the guidance you need to safeguard your financial future, your net worth, as well as your liberty. To schedule a consultation, call us at 800 681-1295 or book online.
What’s The Difference Between A Felony And A Misdemeanor?
There are two types of tax crimes: felonies and misdemeanors. While misdemeanors can be serious, they don’t have the same sentence as felony offenses. Federal tax crime misdemeanors can lead to a one-year sentence, substantial fines and restitution.
A federal felony is the most serious type of federal violation for which a person could be convicted. Federal felonies can be subdivided into five categories, known as Class A-E felonies. Class A felonies can result in a lifetime sentence in prison and/or a fine up to $250,000.
A Class B felony is first-degree criminal tax fraud. The amount of tax lost to the government determines the fine. A tax loss of $30,000 can result in a year in jail. A sentence for tax crimes averages around two years. However, it can vary depending on how much tax loss was involved, the number and length of each count as well as whether the sentences are concurrent or sequential.
Criminal Tax Fraud vs. Tax Negligence
It is not a crime to mislead the federal government in every instance. It is important to determine whether the tax evasion case is a felony by determining the willfulness.
Criminal tax fraud is when a taxpayer acts against tax code and willfully ignores it. In these terms, “willfully” means that the taxpayer must have either actual or implied knowledge about the law or a tax requirement they deliberately violated by using deceptive methods. It can be difficult to prove knowledge, so IRS agents often favor imposing civil fraud or negligence penalties.
Civil negligence penalties are imposed on taxpayers who understate their tax liability, mislead the IRS through accident or neglect. Although these civil penalties are not felony or misdemeanors, they can be costly. Civil negligence penalties (20%) and civil fraud penalties (75%), for incorrectly reporting taxes to the government. Additional penalties may also be added if necessary. Interest will be charged back at the original filing date.
Examiners might be able to see evidence that suggests there was willfulness in a case of tax evasion. This could include the following:
- Falsification of documents
- Multiple financial accounting systems and ledgers
- False identifications such as Social Security numbers
- Overstatement of deduction amounts
- Concealment income
- Inappropriate classifications of personal expenses as business expenses
- Income not reported
Types of Federal Income Tax Fraud
You could be charged with a variety of federal felonies if you are found guilty of willfully trying to evade tax liabilities or lying to the IRS. Here are just some of the possible charges.
Attempting to Avoid Paying Taxes (26 USC SS 7201)
A person who is found guilty of violating Section 7201 could face a five-year sentence, along with a $250,000 fine for individuals and $500,000 to corporations. Additional monetary penalties may be imposed by the prosecution to pay for the legal expenses of the government.
Willfully making fraudulent statements (26 USC SS7206(1)).
This felony can be charged concurrently with Section 7201 and carries the same monetary penalty but also carries an additional three-year sentence.
Willfully failing to file a return or pay taxes on time (26 USC SS7203)
This is a misdemeanor, not a felony, unlike the other two. This charge can result in a sentence of up one year in prison and/or a maximum fine of $100,000 for individuals or $200,000 for corporations.
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This article was written by Alla Tenina. Alla is one of the best IRS Tax attorneys in Los Angeles California, and the founder of Tenina law. She has experience in bankruptcies, real estate planning, and complex tax matters. The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; the ABA and its members do not recommend or endorse the contents of the third-party sites.
