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.

Cross-references

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 ?
At no moment in the process that ends with his decision to evade taxes does he show any sign of taking the possibility of not evading taxes seriously, although he had evidence (namely the moral reasons he was aware of) in favor of that possibility.
The investigation into the newspaper owners came after an exhaustive four-month tax audit, which ended in June and led tax authorities to accuse the nation's 23 major media organizations of evading taxes totaling 505.
Meanwhile, while the FBR is rightly penalising companies evading taxes, it is also working on a tax amnesty scheme for those who have created assets abroad by evading taxes.
Those under the scanner also include select listed companies and their promoters who regularly offer their services for channelising black money and for evading taxes through use of stock exchange platforms.
Now, going back to Tax Evasion (2), even if Joe's attaining a certain level of attentiveness to moral reasons against evading taxes is relevant to explaining Joe's degree of MR for his decision, it does not seem to count as an exempting alternative.
Randy ``Duke'' Cunningham broke down in shame and contrition Monday upon pleading guilty to taking millions in bribes and evading taxes.
The five media moguls questioned are accused of evading taxes by falsifying financial records and diverting company funds for personal use.
Mr Graf is accused of evading taxes to the value of pounds 18m of his daughter's income.
According to the PAGE-source, the action has been taken under the ongoing drive against the illicit trade and recovery of evaded amount of taxes from cigarette manufactures evading taxes.
US authorities are conducting an investigation against 10 Swiss banks suspected of assisting American clients in evading taxes.
THE Reddy brothers of Bellary, who have been maintaining that they are ' innocent', have finally been exposed by the Income Tax Department, which has accused them of evading taxes amounting to ` 87 crore