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There is nothing wrong with taking legal steps to pay as little tax as possible. However, it is a serious crime to take steps to evade paying taxes. It is also a crime to manipulate the tax system for your own financial gain or the financial gain of others. Let’s take a look at why you may be charged with a tax crime, what the penalties may be and how legal counsel may help in your case.
There are two common activities that the IRS tends to charge taxpayers with. The first is failing to file an income tax return in a timely manner, and the second is failure to report all of your income. Other potentially criminal activities include taking deductions that you didn’t have a sound basis to claim or using someone else’s identity to file a tax return.
| Tax Crime | Description |
|---|---|
| Failing to File Tax Return | Not filing an income tax return in a timely manner |
| Failure to Report Income | Not reporting all taxable income on your return |
| Improper Deductions | Taking deductions without sound basis or justification |
| Identity Theft/Fraud | Using someone else’s identity to file a tax return |
| Tax Evasion | Willfully attempting to evade or defeat paying taxes |
The IRS will get copies of any tax forms that you receive from an employer or company that you contracted with in the past year. Your bank, broker or online payment portal may also send paperwork to the government outlining your potentially taxable transactions during the year. This is how it can tell if you are failing to report income or are otherwise making questionable declarations on a tax return.
A tax case is either labeled a criminal matter or a civil matter. If the matter is considered a civil case, the government will likely levy financial penalties. These penalties may include the actual balance owed plus interest and a fine. In a criminal tax evasion case, an individual may face a fine of up to $250,000 per count as well as a prison sentence of up to five years per count.
It is also possible that a taxpayer will be required to pay court costs and other fees if convicted. The IRS determines if a case is a criminal or civil matter based on your pattern of behavior. If the government believes that you tried to willfully evade paying taxes, it will likely pursue criminal charges.
| Case Type | Penalties | When Charged |
|---|---|---|
| Civil Tax Case |
| Mistakes, negligence, or non-willful violations |
| Criminal Tax Case |
| Willful evasion, fraud, or intentional violations |
An attorney will attempt to convince the IRS that you did not intend to defraud the government in any manner. This may be done by showing evidence that you had the right to take certain deductions or reported your income in good faith. If an investigation is related to business activity, legal counsel may provide evidence that an accountant or other party engaged in fraud without your knowledge.
While this may not be enough to avoid all possible penalties in your case, it could result in the government being more sympathetic to your plight. This may result in a case turning into a civil matter where only financial penalties will be levied. If you can prove that you tried to pay taxes owed in good faith, it may be possible to have penalties and interest waived. That would result in having to pay only the principal balance owed.
| Attorney’s Role | How It Helps You |
|---|---|
| Prove Lack of Intent | Show you didn’t intend to defraud the government; can convert criminal to civil case |
| Provide Evidence of Good Faith | Demonstrate you reported income in good faith; may waive penalties and interest |
| Show Third-Party Fraud | Prove accountant or other party engaged in fraud without your knowledge |
| Direct Communication with IRS | Attorney handles audits and meetings; prevents you from inadvertently widening investigation |
| Build Defense Strategy | Gather necessary documents and construct defense to government’s allegations |
| Negotiate with Government | Work to resolve concerns and potentially reduce penalties |
Your attorney can work directly with the government on your behalf. Therefore, you don’t have to attend an audit or any other meeting regarding your case. Avoiding direct contact with the government can be ideal as you may say or do something to inadvertently widen the scope of the matter. Conversely, your attorney will stick to discussing the reasons for the audit and work to resolve any concerns the IRS has in a timely manner.
If you have been audited by the federal government, it is important that you take the matter seriously. Ideally, you will take a few days to gather necessary documents and meet with an attorney prior to saying anything to the IRS. From there, your attorney can build a defense to the government’s allegations and answer any questions that you may have about the case.
| Step | Action | Why It Matters |
|---|---|---|
| 1 | Don’t panic; take the matter seriously | Rushed decisions can make situation worse |
| 2 | DO NOT speak to IRS without attorney | Anything you say can be used to widen investigation or prove willful evasion |
| 3 | Take a few days to gather documents | Tax returns, receipts, bank statements, correspondence needed for defense |
| 4 | Meet with experienced tax attorney | Get legal advice before responding to IRS |
| 5 | Let attorney communicate with IRS | Prevents inadvertent statements that could harm your case |
| 6 | Build defense strategy with attorney | Show good faith, lack of intent, or third-party fraud |
| 7 | Work toward resolution | Convert to civil case if possible; negotiate penalties |
There is nothing wrong with taking legal steps to pay as little tax as possible. Tax planning through legal deductions, credits, and strategies is completely lawful. However, tax evasion – taking steps to evade paying taxes through fraud or deception – is a serious crime. The key difference is intent and legality:
| Legal (Tax Planning) | Illegal (Tax Evasion) |
|---|---|
| Taking legitimate deductions | Taking deductions without sound basis |
| Claiming valid tax credits | Claiming false credits or fabricating expenses |
| Reporting all income accurately | Failing to report income |
| Filing returns on time | Failing to file returns |
| Using legal tax-advantaged accounts | Hiding money in offshore accounts |
| Working with legitimate tax professionals | Using someone else’s identity or creating false documents |
The IRS determines if a case is a criminal or civil matter based on your pattern of behavior. If the government believes that you tried to willfully evade paying taxes, it will likely pursue criminal charges. Factors that may lead to criminal prosecution include:
While an attorney may not be enough to avoid all possible penalties in your case, legal representation could result in the government being more sympathetic to your plight. Possible outcomes include:
If you have been audited by the federal government or received notice of a tax investigation, time is critical. Taking a few days to gather necessary documents and meet with an attorney prior to saying anything to the IRS can make the difference between a civil case with financial penalties and a criminal case with prison time. Your attorney can build a defense to the government’s allegations, prove you acted in good faith, and work to achieve the best possible outcome for your situation.
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- ROBIN, GUN CHARGES ROBIN
NJ CRIMINAL DEFENSE ATTORNEYS