Britt Redden Explains: Is Tax Evasion A Felony?
Theft in Dallas and across the state of Texas doesn’t always look like shoplifting or bank robbery. In many cases, theft comes in the form of information manipulation, missing funds, or omission of the truth. Unlike a gunshot or stabbing, it’s not every day that white-collar crimes like tax evasion are televised. These cases are often difficult to solve, involve various people, and organizations. What’s more, white-collar crimes like tax evasion are most often handled at the state or federal level. Lead times on these cases are long due to the volume of research and evidence necessary for each instance. But at the end of the day, tax evasion can land the perpetrator with a felony charge.
So, What Exactly is Tax Evasion?
Tax Evasion is a broad term—it covers any person or business that intentionally underpays or fails to pay their local, state, or federal tax obligations.
The federal tax evasion statute I.R.C. § 7201 carries two potential offenses:
- The willful attempt to evade the assessment of a tax
- The willful attempt to evade the payment of a tax
The penalties for tax evasion are as follows: The guilty will be fined no more than $100,000 ($500,000 in the case of a corporation), and/or imprisoned no more than five years, as well as on the hook for the costs of prosecution.
In other circumstances, tax evasion can be a simple misdemeanor:
- Misdemeanors are filed when the owed funds are less than $1,500
- Felonies occur after the $1,500 mark
Some common examples of tax evasion can be seen when looking into Texas state tax fraud, for example. While Texas does not charge citizens income tax, there are cases where businesses will try to evade sales tax. For example, a business can face state fraud charges in Texas for keeping fraudulent financial records, under-reporting income, over-reporting deductions, etc.
Understanding Types of Tax Evasion
Lessening payment of local, state, or federal taxes does not always land a person or entity in legal trouble. Tax avoidance is a common practice used by accountants and other professionals who understand tax law. It is perfectly legal to claim deductions and credits to lower the amount of taxes owed, according to Investopedia.
Using intentional and illegal means to lower or evade taxes is the difference between legally reducing taxes owed and being charged with tax evasion. Tax evasion comes in many shapes and forms—criminals are constantly trying new methods to evade taxes.
For example, an individual or business can be charged with tax evasion or tax fraud for under-reporting yearly earnings to pay a lower tax amount. This is a very common example related to all-cash businesses. Envision a cash-only pizza parlor… Reporting cash income is difficult as it is. A criminal business owner might take advantage of this fact by under-reporting these cash earnings to the IRS.
This same scenario of the “all-cash business” can also be applied to cryptocurrencies like Bitcoin or Ethereum. Similar to cash, cryptos are hard to trace (there’s usually a “paper trail” but it can be harder to find). What’s more, reporting income from crypto transactions is not yet a streamlined process—something that the American government is trying to change, according to CNBC.
Furthermore, an entity that declines to report interest earned from a savings account, for example, would be subject to tax evasion charges. Other criminals might conceal assets by associating this information with an unrelated person or business by using a false name or social security number (this may also carry charges for identity theft or money laundering). Finally, tax professionals can be charged with tax preparer fraud for intentionally changing information or using false information when submitting taxes for another person or entity.
Despite the various forms of tax evasion, one key piece of information must be present to convict a person of tax evasion. Any tax evasion case must show intent to underpay or evade tax obligations.
History of Tax Evasion
In 1935, the Gregory v. Helvering Supreme Court case provided legal precedence for tax evasion and fraud in the United States.
Today, US citizens should know that the willful failure to pay taxes is a federal offense under the Internal Revenue Service (IRS) tax code. The IRS can determine if taxes are owed based on the information like a W-2 or 1099. In these situations, a taxpayer’s financial state will be examined to confirm if nonpayment was part of committing fraud or of the concealment of income.
Tax evasion was the case for Walter Anderson who was convicted of the “largest tax evasion scam in US history.” Anderson evaded more than $200 million in taxes after he made millions amidst the breakup of AT&T—he was sentenced to nine years in Washington DC jail. Anderson’s name is on an infamous list of tax evaders like Lil Wayne, Nicolas Cage, Willie Nelson, Al Capone, Wesley Snipes, and Martha Stewart.
Tax Evasion Charges
For lone individuals, it is very difficult to fight alleged white-collar crime charges like tax evasion. Individuals involved in a tax evasion case should know that Redden Law Texas is available today for a consultation.
Britt Redden has a thorough mastery of Texas law. Prior to graduating from SMU Dedman School of Law, Britt was a Student Attorney with the SMU Criminal Justice Clinic where much of her experience focused on representing indigent clients facing criminal charges in Dallas County.
Britt has invaluable experience navigating the courtroom and counseling clients on negotiating plea bargain deals with the client’s individual needs in mind. Now, she uses that knowledge to protect the rights of people in and around Dallas, making sure they receive the strongest possible defense. Britt is an active member of the American Association for Justice, the Texas Criminal Defense Lawyers Association, and Dallas Association Young Lawyers.