tax evasion

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Tax Evasion

The process whereby a person, through commission of Fraud, unlawfully pays less tax than the law mandates.

Tax evasion is a criminal offense under federal and state statutes. A person who is convicted is subject to a prison sentence, a fine, or both. The failure to file a federal tax return is a misdemeanor, but a consistent pattern of failure to file for several years will constitute evidence that these failures were part of a scheme to avoid the payment of taxes. If this pattern is established, the violator may be charged with a felony under section 7201 of the Internal Revenue Code.

The U.S. Supreme Court, in Spies v. United States, 317 U.S. 492, 63 S. Ct. 364, 87 L. Ed. 418 (1943), ruled that an Overt Act is necessary to give rise to the crime of Income Tax evasion. Therefore, the government must show that the taxpayer attempted to evade the tax rather than passively neglected to file a return, which could be prosecuted under section 7203 as a misdemeanor. A person who has evaded taxes over the course of several years may be charged with multiple counts for each year taxes were allegedly evaded.

According to the Supreme Court in Sansone v. United States, 380 U.S. 343, 85 S. Ct. 1004, 13 L. Ed. 2d 882 (1965), a conviction under section 7201 requires proof Beyond a Reasonable Doubt as to each of three elements: the existence of a tax deficiency, willfulness in an attempted evasion of tax, and an affirmative act constituting an evasion or attempted evasion of the tax.

An affirmative act is anything done to mislead the government or conceal funds to avoid payment of an admitted and accurate deficiency. Affirmative behavior can take two forms: the evasion of assessment and the evasion of payment. Affirmative acts of evasion include evading taxes by placing assets in another's name, dealing in cash, and having receipts or debts paid through and in the name of another person. Merely failing to pay assessed tax, without more, does not constitute tax evasion.

The keeping of a double set of books or the making of false invoices or documents can be proof of tax evasion. In some cases the mailing of a false return may constitute the overt act required under section 7201.

Further readings

Mertens, Jacob, Jr. 1996. Mertens Law of Federal Income Taxation. Rochester, N.Y.: Clark Boardman Callaghan.


Taxation; Tax Avoidance.

tax evasion

n. intentional and fraudulent attempt to escape payment of taxes in whole or in part. If proved to be intentional and not just an error or difference of opinion, tax evasion can be a chargeable Federal crime. Evasion is distinguished from attempts to use interpretation of tax laws and/or imaginative accounting to reduce the amount of payable tax.

tax evasion

any act or omission which results in a person paying less tax than is legally due by, for example, concealing or understating a source of income, overstating expenses, making false claims to reliefs or failing to disclose chargeability. It maybe criminal, as opposed to the prudent arrangement of affairs to minimize a tax burden: See TAX AVOIDANCE.
References in periodicals archive ?
Albert Snow then provided the EINs to others to assist them in hiding income from the IRS and thereby evade taxes.
And there are more than three million anonymous corporations--which are designed to conceal the origin and destination of goods in trade and to evade taxes by hiding profits and assets.
The indictment list against Weil accused him and other bankers of helping clients evade taxes between 2002 and 2007.
Murtaza Mughal said that masses will never pay taxes voluntarily in the unfair tax system as they know that politicians having billions evade taxes, get exemptions and look for foreign donors for help.
According to Directorate of Revenue Intelligence ( DRI) officials, the department is gathering increasing intelligence on smuggling of expensive health drugs, most of which are unavailable in the country, and modern fitness equipment, which are being smuggled in at cheap price to evade taxes.
The disparity in tax collection not only creates attraction to evade taxes but is also a disincentive for Investment, it maintained.
The business community asked the Kyrgyz government to tighten fight with entrepreneurs, who evade taxes.
Robert Barrett Braddock, 31, of Simi Valley faces 16 counts of fraud for paying employees of his fence installation business in cash and for filing false reports to the state with the intent to evade taxes in 1998, authorities said.
Lasker to a felony Information charging her with three counts arising out of a scheme by which she unlawfully provided a co-conspirator with IRS Employer Identification Numbers that were later used by others to hide income from the IRS and evade taxes.
The authorities in Mannheim, Germany, say there are signs that the tenors - Jose Carreras, Luciano Pavarotti and Placido Domingo - and Caballe may have helped a local concert promoter to evade taxes.
Asada took the bribes in return for helping the accountant's clients evade taxes.
6229(c) provides that "if any partner has, with the intent to evade taxes, signed or participated directly or indirectly in the preparation of a partnership return which includes a false or fraudulent item," the SOL is extended to six years for all other partners.