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Can I Go to Jail for Helping Someone Evade Taxes?
Can I Go to Jail for Helping Someone Evade Taxes?
Paying taxes is a drag, right? We work hard for our money and then the government comes along and takes a huge chunk of it. I get why some folks try to avoid paying taxes – it means more cash in their pocket. But trying to evade taxes is risky business that can land you in serious legal trouble. What about if you just help someone else dodge their tax bill? Could you end up behind bars just for giving a little help and advice? Let’s take a look at the laws around abetting tax evasion and how much legal hot water you could be in if you assist someone in shirking their tax duties.
What Exactly is Abetting Tax Evasion?
When you purposefully assist someone in illegally avoiding paying their taxes, you are abetting tax evasion. This could involve directly advising or encouraging someone to break tax laws. Or it could simply mean helping them with steps that allow them to evade taxes. Examples of abetting tax evasion include:
- Suggesting someone not report cash income on their tax return
- Advising someone to overstate deductions on their taxes
- Helping someone set up a shell company to hide assets and reduce taxable income
- Referring someone to shady accountants or advisors who assist with tax evasion
- Providing services that help someone evade taxes, like setting up offshore bank accounts
So if you knowingly give any assistance that allows someone to illegally avoid paying owed taxes, you are abetting tax evasion. This includes both advice and direct help with hiding income and assets. Simply looking the other way doesn’t get you off the hook either – you don’t have to be an active participant to be considered aiding and abetting.
Abetting Tax Evasion is a Federal Crime
Here’s the deal. Abetting tax evasion is a big-time federal crime. We’re talking felony charges and possibly years in federal prison. The law that makes it illegal is Section 7206 of the Internal Revenue Code. This law makes it a felony to willfully assist in the preparation of a false or fraudulent tax return. The maximum prison sentence is 3 years and fines can be up to $250,000 for individuals.
Yikes! Now you can see why you want to steer clear of doing anything that could be seen as helping someone cheat on their taxes. Just having general knowledge that a person or company is evading taxes – without directly assisting in the process – is not enough to charge you with abetting tax evasion. But once you cross over into providing actual help and advice for illegal tax avoidance, you are opening yourself up to prosecution.
You Don’t Have to Succeed to Be Guilty
Here’s another thing to be aware of. Under the law, the person you’re assisting doesn’t even have to be successful in evading taxes for you to be prosecuted. As long as you intentionally tried to help them break tax laws, you are on the hook. The government just has to prove you willfully intended to assist tax evasion, whether or not the person actually got away with it. So you could end up in legal jeopardy either way.
Examples of People Prosecuted for Abetting Tax Evasion
Wondering if the government really cracks down on people for abetting tax evasion? Here are some real-world examples of folks who got caught and prosecuted:
- A Minnesota man helped his clients set up Swiss bank accounts to hide assets. He got 5 years in prison.
- An accountant in Florida helped clients illegally write off personal expenses as business expenses. He got 1 year in prison and had to pay over $800,000 in restitution.
- A lawyer in New York gave advice on hiding income in offshore accounts. He got 8 years in prison.
- A Virginia businessman helped companies structure transactions to avoid federal excise taxes. He got 2 years in prison and had to pay $1.3 million to the IRS.
As you can see, the government isn’t messing around here. Significant jail time is a very real possibility if you cross the line into abetting evasion of taxes owed.
Defenses Against Abetting Tax Evasion Charges
Let’s say you get caught up in a tax evasion case against someone you advised or assisted. Are there any defenses you can raise to avoid conviction? There are a few options, but they are difficult to prove:
- You didn’t actually know you were assisting tax evasion – For example, maybe you were unaware the person was doing anything illegal. But this can be tough when there is evidence like emails or witnesses showing you knew.
- You made a good faith mistake – For instance, you reasonably relied on false information from the person and mistakenly thought you were assisting with legal tax avoidance instead of evasion. However, the government may argue you should have known better.
- You were entrapped – This means the government induced you to commit a crime you otherwise wouldn’t have. But entrapment is hard to prove and rarely succeeds as a defense in tax cases.
Because the government only has to show your intent to assist evasion, claiming you didn’t know better is an uphill battle. The burden is on you to conclusively demonstrate you had no idea you were involved in illegal activity.
How to Avoid Abetting Tax Evasion Charges
Now that you know the serious penalties for abetting tax evasion, here are some tips to keep yourself out of legal jeopardy:
- Be very wary of requests for help hiding income or assets to reduce taxes. Politely decline to get involved.
- Don’t make casual suggestions about fudging numbers or exaggerating deductions. Even jokes can come back to haunt you.
- Refuse to take part in shady schemes that seem aimed at evasion and look for legitimate tax avoidance strategies instead.
- Don’t ignore red flags that a person or company may be engaged in illegal tax evasion. Distance yourself from the situation.
- Consult your own tax expert or lawyer about any concerning tax-related requests for assistance to assess the legal risks.
The bottom line is to steer far clear of knowingly assisting someone in evading their tax obligations. Stick to above-board tax planning advice and don’t be tempted to cross legal lines, no matter how much someone may try to persuade you to help them out. Getting involved in tax evasion can ruin your career, finances and freedom if you end up with a criminal conviction. It’s just not worth the legal risk!
I hope this overview gives you a better understanding of abetting tax evasion and the serious penalties you could face. Paying taxes may not be fun, but neither is jail time! Play it safe and don’t do anything to put yourself on the wrong side of the tax law. Uncle Sam doesn’t take tax cheating lightly, so protect yourself and just say no if asked to assist with shady tax avoidance schemes. Your freedom is too high a price to pay for helping someone else dodge their tax bill.