What Constitutes Federal Tax Evasion and Tax Fraud in California?

What Constitutes Federal Tax Evasion and Tax Fraud in California?

Paying taxes is a civic duty, but some try to avoid doing so through illegal means. Tax evasion and tax fraud are serious federal crimes that can lead to substantial penalties if convicted. Understanding what actions constitute tax evasion or fraud is important for all taxpayers in California.

This article will explain key aspects of federal tax evasion and fraud laws, penalties offenders face, and potential defenses. We’ll also provide tips on choosing an experienced tax fraud defense attorney if you’re being investigated or charged.

Tax Evasion vs. Tax Fraud

Though often used interchangeably, tax evasion and tax fraud refer to distinct criminal violations of the federal tax code:

• Tax evasion – Intentionally failing to pay taxes you owe or underreporting income/assets on your tax return.
• Tax fraud – Knowingly making false statements on a tax return to reduce amount owed.

Both are felonies carrying severe penalties, discussed next.

Penalties for Federal Tax Crimes

The main federal laws used to prosecute tax evasion and fraud in California are 26 U.S. Code § 7201 and § 7206. If convicted, penalties can include:

• Up to 5 years in federal prison for tax evasion or 3 years for tax fraud.
• Fines up to $100,000 for individuals or $500,000 for corporations.
• Owing back taxes plus interest and penalties.

The court can also impose supervised release, community service, and monetary restitution. Other consequences include harm to your finances, career, and public reputation.

What Actions Constitute Federal Tax Evasion?

Some common examples of tax evasion include:

• Failing to file a federal tax return or filing late
• Underreporting income, sales, or capital gains
• Exaggerating deductions or business expenses
• Hiding funds or assets in offshore accounts
• Using complex schemes or false entities to obscure taxable income

Even if you eventually file and pay what you owe, intentionally failing to pay taxes on time is still tax evasion under federal law.

What Actions Constitute Federal Tax Fraud?

Some examples of tax fraud include:

• Claiming false deductions or exemptions you don’t qualify for
• Reporting false information regarding expenses, income, investments etc.
• Using a stolen or fake Social Security number
• Filing tax returns for deceased individuals
• Lying about sources of income
• Creating fake documents to support fraudulent tax claims

Providing false information on your tax return to intentionally mislead the IRS constitutes tax fraud.

How the IRS Investigates Tax Evasion and Fraud

The IRS and federal prosecutors use various methods to build tax evasion and fraud cases, including:

• Audits – Comparing tax returns to banking/income records
• Interviews – Questioning you or associates under oath
• Informants – Offering rewards for tips on tax cheats
• Surveillance – Monitoring suspect financial activities
• Search warrants – Seizing evidence from your home or business

If they uncover clear evidence of intentional tax violations, you may face criminal prosecution.

Defenses Against Federal Tax Charges

In tax cases, intent to evade taxes is crucial for a conviction. Your attorney may argue you:

• Made an honest mistake
• Had a good faith belief you were complying with tax laws
• Relied on a tax professional’s erroneous advice
• Didn’t “willfully” commit tax fraud or evasion

The IRS bears the burden of proving you knowingly and intentionally violated tax laws. Skilled tax crime lawyers can often get charges reduced or dismissed pre-trial.

Choosing an Experienced Tax Fraud Lawyer

Facing federal tax evasion or fraud charges is daunting. The IRS has vast resources, so mounting a strong defense requires an experienced tax fraud lawyer. Seek counsel who:

• Has represented clients charged with federal tax crimes
• Can negotiate with IRS agents and federal prosecutors
• Understands complex tax laws and loopholes
• Has gotten tax charges dismissed pre-trial
• Will aggressively defend you in court if necessary

A skilled tax attorney intimately familiar with federal tax statutes and case law can maximize your chances of avoiding harsh penalties. Don’t delay in contacting a tax fraud lawyer for help.

Act Quickly if Facing Tax Evasion Charges

If federal agents question you regarding tax matters, politely decline to answer anything substantive until your lawyer is present. Any statements can be used against you later.

Retaining counsel quickly allows you to get out ahead of the investigation. An attorney can request information from the IRS, challenge unconstitutional investigatory tactics, and protect your legal rights from the start.

Navigating federal tax charges is complex. For the best chance at avoiding convictions and potential prison time, contact an experienced tax fraud defense lawyer right away.