08 Feb Tax Evasion
What is Tax Evasion?
Definition: Tax evasion refers to the deliberate nonpayment of taxes. It could involve the intentional suppression of income, underpayment of taxes, or the adoption of fraudulent accounting practices.
What does Tax Evasion mean?
Remember that tax evasion always involves a conscious act. It is never a mistake. An individual or a corporation may attempt to falsify its taxable income by inflating expenses. Another way to evade taxes is to report lower revenues. This will result in lower net income and lead to a reduced tax liability.
The Internal Revenue Service, which is a federal government agency that is part of the Department of the Treasury, views tax evasion very seriously. Tax evaders can be subject to jail terms and stiff penalties in addition to the requirement of discharging their tax liabilities.
Tax evasion is usually referred to in the context of unpaid income taxes. But it could also apply to sales tax, estate tax, or employment tax.
Don’t confuse tax “evasion” with tax “avoidance.” The former is a deliberate act to defraud the government of taxes. Tax “avoidance,” on the other hand, refers to using legitimate means to lower the tax liability. However, there are times when there is a thin line between evasion and avoidance.
Example of Tax Evasion
Tax evasion is a serious issue for the government. According to an estimate published in Fortune, fraudulent practices by taxpayers cost the federal government an average of $458 billion per year in the period between 2008 and 2010.
How much of this amount will the IRS ultimately recover? Unfortunately, only a small fraction. The IRS says that it will be in a position to collect only $52 billion on an annual basis. The vast majority of tax evaders will get away scot-free.
Tax evasion is an unlawful activity carried out by individuals and businesses with the purpose of paying lower taxes. It is a criminal offense, and tax evaders could be subject to jail terms and penalties.