Published on: May 2, 2017 Last modified: June 11, 2020

Is It Tax Avoidance or Tax Evasion?

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    There is a simple difference between tax avoidance and tax evasion. Tax avoidance may be legally permissible, but tax evasion could lead to criminal charges and result in you going to jail.

    Prompt action is necessary when it comes to criminal tax charges. It is always a bad idea to assume anything when it comes to the IRS. Good intentions may not be enough. Though tax-filing mistakes may be unintentional, it is still necessary for taxpayers to demonstrate that they were behaving reasonably when mistakes occur. Such reasonable behavior could include reliance upon professionals while engaged in tax planning.

    Civil audits can result in criminal prosecution

    It is important to remember that civil audits often result in criminal prosecution. More than your simple word is required to avoid liability. You as the taxpayer still shoulder the burden of proof by demonstrating that there were no mistakes or that mistakes made were innocent.

    Even with innocent mistakes, tax penalties can be significant. Most tax penalties are at around 25 percent. However, should the IRS believe that your actions are intentional, penalties could be as high as 75 percent and also include criminal prosecution.

    While in many tax cases the IRS has three years to audit your returns, there are many exceptions to this rule. For instance, a significant omission of reporting income on your returns could result in allowance of six years to audit returns. And this six-year period may not begin to run until the last act of alleged tax evasion occurs.

    Talk with a tax lawyer

    Michigan residents facing charges of tax evasion or tax fraud could greatly benefit by speaking to an experienced tax attorney. When charged with a tax crime, you are still entitled to have your side of the story heard. This includes having representation on your side.

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