The End of the Stressful Tax Season
As tax season ends, your Income Tax Return starts to be filed, giving you and many others the relief and peace of mind they might need. It is important for you or anyone filing a yearly Income Tax Return to remember the consequences that can happen if you lie or avoid filing your Income Tax Return.
Tax Avoidance vs. Evasion
Tax avoidance is a legal method that minimizes the amount of income tax owed by an individual or a business. This is the process of taking deductions and credits when you are preparing to file your yearly Income Tax Return, so you do not pay more than what is required by the tax law.
Tax evasion is illegal and is when you willfully do not pay the taxes you owe according to the tax law. This is when you earned enough income to owe taxes and you choose to ignore your requirement to pay and choose not to pay them. This can happen when people under-report or blatantly fail to report income or revenue they earned to the Internal Revenue Service, also known as the IRS. This is considered a white-collar crime and can include falsifying books and records, sales tax, failure to pay employees’ payroll withholding tax, and much more.
Tax Fraud Investigations
The Internal Revenue Service has criminal investigators who serve the American public and investigate potential criminal violations and other related financial crimes committed by people. They investigate Income Tax Return preparers, these preparers are businesses that assist in doing your Income Tax Return for you; such as H&R Block, Jackson Hewitt Tax Services, Turbo Tax and other small tax business services. The IRS makes sure these businesses work lawfully so you get the proper Income Tax Return and the business file is completed correctly and truthfully without falsifying your information.
The IRS also investigates employment tax evasion and tax schemes, such as employers paying the employee in cash, filing false payroll tax returns or failing to file a payroll tax return. They also investigate the general fraud violations of taxpayers not willfully or intentionally not complying with their legal responsibilities to file their required Income Tax Return and more.
Texas Tax Fraud
Since the State of Texas does not have an income tax, its primary source of tax is sales tax and as such, tax fraud mostly involves businesses. Tax fraud is either a state or federal offense in Texas and can result in prison and fines if committed. Tax fraud is when you intentionally falsify information on your return to misrepresent your total tax liability. Certain violations can cause tax fraud in certain industries, such as cigarette taxes and taxes on the sale, rental and use of motor vehicles. These are some of the criminal tax charges provided in the tax code.
Tax Fraud Penalties
Every type of tax fraud has its own separate penalty and it is important to look at the specific offense to understand the full gravitation of the offense. To sum it up and to give you a small idea of the penalties you might face, here is an outline of certain crimes that can take place and their penalties.
Failure to Pay Taxes Collected (Tax Code 151.7032)
A person commits this offense if they intentionally or knowingly fail to pay the required amount to the Tax Comptroller. Depending on the amount owed, the punishment level varies and this is how it is classified.
A Class C misdemeanor; if less than $50
A Class B misdemeanor; is more than $50 but less than $500
A Class A misdemeanor; is more than $500 but less than $1,500
A State jail felony; if more than $1,500 but less than $100,000
A third-degree felony; if more than $20,000 but less than $100,000
A second-degree felony; if more than $100,000 but less than $200,000
A first-degree felony; if more than $200,000
False Entry or Failure to Enter in Records (Tax Code 151.7102)
A person commits this offense if the person intentionally or knowingly conceals, destroys, makes a false entry in the records or fails to make an entry in records that are required to be made or kept. This is a felony of the third degree, which is punishable by up to $10,000 in fines, 10 years in prison or both fine and prison time.
Failure to Produce for Inspection or Allow Inspection of Records (Tax Code 151.7103)
This offense is committed when a person is asked by an authorized comptroller to produce or allow inspection of a record and the person fails to produce the record or allows the inspection after the allowed time. This offense is a class C misdemeanor and each day the person fails to allow inspection of records or produce records for inspection after receiving the request, is a separate offense.
Resale or Exemption Certificate (Tax Code 151.707)
This offense is committed if the defendant intentionally or knowingly makes a false entry or a fraudulent alteration of an exemption or resale certificate. The defendant also committed this offense if he or she unreasonably impedes the availability of an exemption or resale certificate.
Federal Tax Evasion
Whether it is an individual person or business, when you or the entity is investigated by the Internal Revenue Service for alleged tax evasion, there are federal charges that could apply. The U.S. Code is a consolidation and codified by the subject matter of general and permanent laws of the United States. These are Federal Laws you can be charged with alongside your State Penal Code.
Title 26 U.S Code 7201, Attempt to Evade or Defeat Tax
According to the U.S Code under the title of IRS it states that any person or business who willfully attempts in any manner to evade or defeat any tax imposed by the Internal Revenue Service or the payment thereof, shall in addition to other penalties provided by the law be guilty of a felony and convicted. They should not be fined more than $100,000 ($500,000 in the case of it being a corporation) or imprisoned for not more than five years or both fined and imprisoned.
Title 26 U.S. Code 7202, Willful Failure to Collect or Pay Over Tax
The alleged offender commits this crime if they are required to collect, account for and pay over any tax imposed and they willfully fail to collect and truthfully account for and pay over such tax. Then they are subject to a punishment of a fine up to $100,000 for individuals ($500,000 for a corporation) and/or up to five years in prison.
Title 26 U.S. Code 7203 Willful Failure to File Return, Supply Information or Pay Tax
If an alleged offender is required to pay any estimated tax or tax or is required to file an Income Tax Return, keep any records or supply any information and willfully fails to do any of that. They are subjected to a conviction of a fine up to $25,000 and/or up to a year in prison.
Defense Against Tax Fraud
The IRS must prove the defendant knew of their wrongdoing and intentionally misreported their income taxes. Or they intentionally tried to evade their income taxes. A defense that can be used to protect the defendant is the mistake of the law. Income Tax Returns are confusing to file and trying to make sure you can maximize your Income Tax Return as everyone wishes. A simple mistake should not be punishable, as you simply misunderstood how to file properly.
Need Help? Call Us Now!
Here at the Law Office of Bryan Fagan, we have professional and knowledgeable Criminal Law attorneys who are experienced in building a defense for you that suits your needs for the best possible outcome that will benefit you. We offer complimentary consultations via Zoom, on the phone or in-person.
Call us today at: 281-810-9760.
Bryan Fagan, a native of Atascocita, Texas, is a dedicated family law attorney inspired by John Grisham’s “The Pelican Brief.” He is the first lawyer in his family, which includes two adopted brothers. Bryan’s commitment to family is personal and professional; he cared for his grandmother with Alzheimer’s while completing his degree and attended the South Texas College of Law at night.
Married with three children, Bryan’s personal experiences enrich his understanding of family dynamics, which is central to his legal practice. He specializes in family law, offering innovative and efficient legal services. A certified member of the College of the State Bar of Texas, Bryan is part of an elite group of legal professionals committed to ongoing education and high-level expertise.
His legal practice covers divorce, custody disputes, property disputes, adoption, paternity, and mediation. Bryan is also experienced in drafting marital property agreements. He leads a team dedicated to complex family law cases and protecting families from false CPS allegations.
Based in Houston, Bryan is active in the Houston Family Law Sector of the Houston Bar Association and various family law groups in Texas. His deep understanding of family values and his professional dedication make him a compassionate advocate for families navigating Texas family law.
