Most people know that tax evasion is a white-collar crime that the IRS investigates and prosecutes against individuals and businesses. Tax evasion generally means not paying your taxes or not paying all that you owe. But unless you have been charged with tax evasion, you might not know that there are actually two forms of tax evasion under federal law: evasion of assessment and evasion of payment.
Evasion of assessment
In this form of tax evasion, the taxpayer tries to manipulate the tax bill by evading the assessment of tax. In general, this means trying to make it appear that you earned less income than you really did. Examples include keeping a double set of books, overstating deductions on your return and destruction of records.
Evasion of payment
While evasion of assessment is an attempt to avoid being charged the full amount of taxes you owe, evasion of payment is a fraudulent attempt to claim you cannot afford to pay your income taxes. This involves acts like illegally stashing money in a foreign bank account or temporarily transferring it into a relative’s account to hide it from an IRS audit.
If you are worried that you might accidentally have done either one of these things, don’t worry. The law requires that the defendant intentionally made an affirmative act to evade tax assessment or payment. An error on your tax return should not lead to criminal charges. However, bad advice from a tax preparer or accountant could lead to trouble for you.