How Tax Liens Lead to Federal Tax Evasion Charges in California

How Tax Liens Lead to Federal Tax Evasion Charges in California

Not paying your taxes can lead to serious consequences in California. If you don’t file your tax returns or pay the taxes you owe, you could face both civil and criminal penalties from the state and federal government. One common result of not paying taxes is a tax lien being placed on your assets – but this can also start you down the path towards tax evasion charges.

What is a Tax Lien?

A tax lien is a legal claim against your property as security for unpaid taxes[6]. Both the IRS and California’s Franchise Tax Board (FTB) can place liens against your property if you fail to pay your income taxes. A federal tax lien means the government can seize your property if you don’t pay – including your house, car, or bank accounts. The lien publicly announces the debt so creditors are aware the government has a legal right to your property.

Some key things to know about tax liens:

• They are placed automatically if you owe $10,000+ in back taxes
• They allow the IRS/FTB to seize your assets if you don’t pay
• They negatively impact your credit score
• They must be resolved before you can sell your home or other assets

As you can see, tax liens can have major financial consequences. Unfortunately, some people respond to a tax lien by trying to evade taxes – which leads to criminal charges.

How Tax Liens Lead to Tax Evasion

Once you have a tax lien against you, it can feel overwhelming to pay off your tax debt. Some people respond by trying to avoid paying taxes altogether through illegal tax evasion. Common ways tax liens spur tax evasion include:

• Not filing returns – If you have a lien for back taxes, you may be tempted to not file returns for future years.
• Hiding income and assets – People try to hide money and property so the IRS/FTB can’t seize it.
• Using a false Social Security number – Some attempt tax evasion by using a fake SSN not linked to their tax debt.
• Claiming false deductions – Bogus deductions and expenses are used to try reducing taxable income.

While it’s human nature to want to avoid paying if you have major tax debts, giving in to evasion will only lead to criminal prosecution. And tax evasion charges are no joke in California.

Tax Evasion Penalties in California

California aggressively prosecutes both state and federal tax evasion. Common criminal charges for tax evasion include[5]:

• Tax Evasion – Up to 1 year in jail + fines up to $100,000.
• Filing a False Return – Up to 3 years in jail + fines up to $250,000.
• Failure to File – Up to 1 year in jail + fines up to $25,000.
• Employment Tax Evasion – Up to 1 year in jail + fines up to $100,000.

Prosecutors don’t need to prove you owe the tax bill – just that you tried to illegally avoid paying. And if they can show tax fraud or that your evasion was “willful,” you may face federal felony charges with up to 5 years in prison.

Defenses Against Tax Evasion

Fighting tax evasion charges in California starts with understanding prosecutors must prove beyond a reasonable doubt[1]:

1. You had a tax deficiency – that you owed taxes
2. You tried to evade or defeat paying taxes
3. Your actions were willful – intentional and illegal

Common defenses against tax evasion charges include:

• You made an honest mistake or had no “willful intent” to break tax laws
• You had a good faith belief you didn’t need to file or owe taxes
• You relied on a tax advisor’s guidance
• You have records proving you don’t actually owe taxes

An experienced tax crimes lawyer can evaluate whether you have a defense against tax evasion charges in California. They may also be able to negotiate reduced penalties or avoid jail time through programs like the IRS Fresh Start Initiative.

Get Legal Help Responding to Tax Liens

If you’ve received a tax lien notice from the IRS or California FTB, don’t panic. A tax attorney can help you[3]:

• Negotiate a payment plan or offer in compromise
• File back returns if needed
• Remove or release the tax lien from your property
• Avoid criminal prosecution for tax evasion

You have legal options for responding to tax debts that don’t involve evasion. The worst thing you can do is ignore tax liens and attempt to illegally avoid paying taxes. Talk to an experienced tax lawyer right away if you’ve been assessed tax liens in California.