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.

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.

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.

Copyright © 1981-2005 by Gerald N. Hill and Kathleen T. Hill. All Right reserved.

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.
Collins Dictionary of Law © W.J. Stewart, 2006
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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.
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The five media moguls are accused of evading taxes by falsifying financial records and diverting company funds for personal use.
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Haji in a statement said Gendipe Enterprises and Rupai Trading Limited with help of clearing agent, Landmark Freight Services Limited, custom and KEBS officials concealed imported goods with the aim of evading taxes.
KARACHI -- There is a need of improving revenue collection, as the culture of evading taxes and duties is causing revenue loss to the government, and concerned departments should take notice in this regard.
We are only against the illegal units which are evading taxes and making their compliant counterparts uncompetitive and ineffective.
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. The intelligence network of the directorate has intensified efforts for detection of such cases of tax evasion within the tobacco sector.