When you earn income as a resident of the United States, it's your responsibility to pay federal, state, and local income taxes.
While most people realize the importance of doing so, others are confused as to how the tax system works and what they're required to do.
There is a big difference between making a tax mistake and tax evasion.
Let's start by saying this: A tax mistake is not the same as tax fraud. The IRS realizes that people make mistakes from time to time. An example of this would be adding the wrong numbers when filing an income tax return.
While a basic mistake may cost you some time and money, such as in the form of a penalty and/or interest, there is nothing criminal about this. Instead, once you correct the error you can move on with your life.
Conversely, tax evasion is a serious crime. As the name suggests, this is when you take steps to intentionally underpay your taxes. This is not an honest mistake but instead something that you do on purpose.
An example of tax evasion would be underreporting income, such as if you own a hair salon or work as a waiter. With both of these professions, it appears easy to hide cash earnings as to avoid taxation. Although this sounds like a good way to save money, it's against the law.
Another example of tax evasion is hiding money in overseas bank accounts. This is something that many people attempt to do, with many caught and in turn finding themselves in trouble with the IRS.
As you can see, there is a big difference between a tax mistake and tax evasion. However, here's the problem: there is a lot of gray area, often meaning that a person is charged with a crime that he or she did not commit.
If you made a tax mistake and are being investigated by the IRS for tax fraud, it's important to learn more about the charges and your legal rights. This is a serious crime that has serious implications, including hefty fines and time in prison. By consulting with an experienced tax attorney, you can better understand your situation and the steps you can take to clear your name.
Source: Nov. 30, -0001