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Does tax evasion equal jail time?

| Jan 10, 2021 | White Collar Crimes |

Individuals who avoid paying their fair share of taxes can face charges of tax evasion in Michigan courts. This fact is relevant whether the avoidance of the tax burden happens on purpose or is unintentional. Tax evasion is a serious crime that can result in consequences. These consequences can include time spent behind bars.

Tax evasion defined

Individuals are often unsure of when they cross the line between legally avoiding excessive taxes and becoming guilty of tax evasion. Tax avoidance includes legal acts of tax restructuring that can save money and provide other benefits to taxpayers. Tax evasion is an unlawful attempt to avoid paying taxes on income a taxpayer earns.

How trouble begins

Tax evasion, like many white-collar crimes, often falls under the authority of the federal government. The Internal Revenue Service is the government agency responsible for ensuring that wage earners pay the proper amount of federal taxes.

Unreported income is the most common issue that triggers problems between taxpayers and the IRS. This unreported income can be money from a side job, the sale of a business, or another income source that an employer does not report directly to the IRS. Many people who take part in the “gig economy” have found themselves in hot water with the IRS for failure to report income.

The second way taxpayers can find themselves in trouble with the IRS is by exhibiting behaviors that the Revenue Service characterizes as “badges of fraud.” These behaviors include actions like concealing the presence of bank accounts. These represent more than just harmless mistakes and are likely to lead to criminal investigations.

Consequences

The IRS typically does not pursue criminal prosecution in response to most cases in which taxpayers become technically guilty of tax evasion. However, when the IRS decides to treat these actions as a crime, the consequences can be devastating. The taxes owed must be paid along with a fine added to the balance. Individuals guilty of tax evasion also face up to five years in jail.

Individuals facing tax evasion allegations will need to mount an effective defense for themselves if they wish to avoid the worst consequences possible. An attorney familiar with the process may help negotiate a payment plan that will not place an unreasonable financial burden on the taxpayer while eliminating the possibility of jail time.