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Is tax evasion a serious crime?

Taxes affect everyone, regardless of status. Some people actively try to evade or avoid paying all the taxes they owe, and most people understand that purposely doing so is a crime. The justification that many people make is that evading "just a little" is not such a big deal, and therefore the risk is minimal. Tax evasion is a crime, however, regardless of the amount. It is important to understand the basics surrounding the crime of tax evasion to avoid getting into legal trouble.

Defining tax evasion

The IRS defines tax evasion as "some affirmative act to evade or defeat a tax, or payment of tax." It makes a distinction between tax evasion and tax avoidance. It states that while tax evasion is illegal, tax avoidance - when taxpayers use legitimate means to try to avoid, reduce or minimize their tax burden - is legal. Therefore, the first thing to examine in a tax evasion case is whether the situation is truly evasion or simply avoidance, which employs legal means.

An important aspect of tax evasion is the willful attempt to defraud the government. Willfulness figures as a component in determining whether prosecution for a crime is possible in the case. Tax crimes can result from legal activities, so the element of willfulness helps prosecutors determine whether the tax evasion was an innocent mistake made in good faith or a purposeful attempt to commit fraud.

Understanding the seriousness of tax evasion

Federal law classifies tax evasion as a felony. A conviction can result in fines of up to $100,000 in cases of individual tax evasion (as opposed to corporate tax evasion). A conviction can also lead to jail time of up to five years. Given the harsh penalties associated with a conviction for tax evasion, most people would consider this crime to be serious. You should not underestimate what is at stake if federal or state authorities charge you with tax evasion.

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