What is Tax Evasion

Tax evasion can be any of 2 things: a taxpayer willfully and knowingly attempted to evade taxes, or a taxpayer owes more tax in addition to what's declared in his tax return.

Tax evasion is a federal offense because the person tries to evade settling federal income taxes. This crime could put you in prison with a maximum sentence of five years and a fine of $100.000.

It doesn't matter how much tax is owed, it only has to be proven that the taxpayer willfully and knowingly evaded taxes.

Penalties for Tax Evasion

Possible criminal prosecution and penalties await tax evaders. Here's a partial roster of civil and criminal penalties:

Civil penalties:

• Failure-to-file penalty can't be more than twenty-five per cent of your tax not paid, five per cent of your tax not paid every month or a fraction thereof.
  
• Failure-to-pay penalty is half of one percent of your unpaid taxes each month or a part thereof, but not above twenty-five per cent.
  
• Tax penalty for frivolous return for when you file a return that does not have sufficient information to determine the correct tax or a return that shows an incorrect amount is $500.
  
• Accuracy-related penalty is 20% for understatement of income tax, or underpayment due to disregard of rules and negligence.
  
• Information reporting penalties: From $15 to $50, depending on how late the information return is filed.
  

Criminal penalties:

• Evading taxes
  
• Fraud and false statements
  
• Filing fraudulent returns
  
• Willful failure to file a return
  
• Supply information
  
• Pay any tax liability
  

These are criminal penalties and you can be brought to trial.