The Supreme Court has rules that you may legitimately take actions to “reduce, avoid, minimize, or alleviate taxes through wholly legitimate means,” commonly referred to as tax avoidance. However, if you do not do so through legitimate means, you have crossed the line into tax evasion.

Tax evasion is the criminal version of tax avoidance. It means that you have failed to report income, taking an illegal deduction, engaged in fraud, or otherwise willfully underpaid taxes that are due. It is important for taxpayers and tax preparers to be familiar with the tax code and the taxes that they are responsible for,  to avoid either paying penalties and interest for non compliance or facing potential criminal charges.

The IRS treats tax evasion as a serious matter, and failure to reply to their tax notices in a timely manner can result in them investigating your for criminal tax evasion.

If you file on time, but fail to report some income that the IRS knows about, the IRS may send you a CP2000 Notice. On the other hand, if you fail to report income that the IRS does not have a record of, you risk them finding out about the discrepancy during an audit, where the stakes are substantially higher.

By complying with the relevant tax codes, filing your tax forms on a timely basis, you can comply with the rules without risking punishment for tax evasion. As long as your keep your actions legal, you have no moral or legal obligation to pay more taxes than the minimum due, but it is important that you comply with all relevant regulations to keep those actions legal.

 

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