Tax Evasion: What are the Consequences?

Tax Evasion, Fraud and the Statute of Limitations

The IRS necessitates that taxpayers provide accurate information about their incomes. It also requires them to submit correct financial documents and use the right social security number when filing returns.

Tax evasion refers to when you use illegal methods to avoid paying taxes. It also includes falsifying documents and failing to reveal some income so you can pay a lower amount.

Since tax evasion is a criminal offense, you may face severe consequences. Here we help you identify what happens if you commit this crime. We will also discuss some tips on avoiding the repercussions.

Tax Evasion Penalties

If you committed tax evasion, the IRS might impose a penalty of up to $250,000. This consequence may occur even if the government does not formally charge you.

The IRS treats failure to file your returns as tax evasion. This mistake attracts a fine ten times more than the one imposed for failure to pay.

The best way to avoid tax evasion penalties associated with failure to file is to submit your returns within 60 days after the deadline. This measure is critical even if you cannot clear the entire amount you owe.


If the IRS discovers that you did not remit some taxes and failed to include the amount in your returns, they will charge interest.

The IRS changes the rates each quarter. Often, it calculates the underpayment rate by adding 3% to the federal short-term rate. It then imposes interests from the first day after the filing deadline.

Criminal Charges

Evading taxes is a serious crime that can lead to prosecution in a federal court. If the judge finds you guilty, you may go to jail for up to 5 years. You might also have to pay a fine of up to $100,000.

Tax Liens

Another common consequence of tax evasion is a lien. This term refers to when the federal government imposes a legal claim on your property.

The IRS will send a Notice of Federal Lien before seizing your assets. They then put this information in public records to notify creditors. This issue can prevent you from using your property as security when obtaining loans.

When the IRS files a tax lien, they will only lift it when you pay the total amount you owe. This will include penalties, recording fees, and interests.

Still, they may release the lien under exceptional circumstances. An example is when you had a good reason for failing to submit the correct tax information.

Tax Levy

The IRS can impose tax levies on your financial assets due to evasion. Some resources you may lose are:

  • Retirement benefits
  • Social security payments
  • Salary and wages

The IRS may impose a levy release on other assets such as houses and cars. They will then sell the properties to recover the amount you owe.

How to Avoid the Consequences of Tax Evasion

The consequences of evading taxes can significantly affect your finances. You may also lose freedom and incur a lot of expenses.

Avoid these issues by paying all the amount you owe. If you aren't sure how much to remit, get tax resolution and preparation services.

Specialists can help you calculate the due amount and file back taxes. Such measures may prevent the IRS from charging you with tax evasion in case of an audit.

Other ways a resolution expert can help you avoid tax evasion consequences are:

Avoid Tax Evasion Consequences With FinishLine Tax Solutions

Consulting tax attorneys or CPAs can make it easy to avoid tax evasion consequences.

At FinishLine Tax solutions, we have experts that deal with tax evasion consequences. These will file your returns to ensure you submit the correct information. They can also offer legal guidance when the IRS sends a notice or seizes your property. Contact us now for a consultation.

Tax Evasion, Fraud and the Statute of Limitations

Tax Evasion, Fraud and the Statute of Limitations

When calculating or filing back taxes, you may make various mistakes, leading to remitting an amount that is less than what you owe. While the error may be minor or accidental, the IRS may consider it as fraud or a way to evade paying taxes.

Since the difference between tax evasion and fraud is confusing, you should learn about the two to avoid getting in trouble with the IRS. Here, we provide more details about these two aspects to help you differentiate them. We'll also discuss what you should do if you find yourself in such situations to avoid further consequences.

What is Tax Evasion?

Tax evasion refers to using illegal methods to avoid paying your taxes in full. For example, you may fail to submit the relevant tax filing forms then refuse to remit any amount even after an assessment.

Since the IRS can determine the taxes you owe them using documents sent by third parties like your employer, they can easily detect evasion.  This issue will then lead to penalties and criminal charges depending on the gravity of the situation.

What is Tax Fraud?

Tax fraud is the deliberate misinterpretation of information regarding your taxes or failing to include some details on your return forms. An example is when you do not disclose all income sources to reduce the amount due.

Other examples of tax fraud are:

  • Using the wrong social security number
  • Claiming false deduction
  • Claiming personal expenses as business spending
  • Filing under the incorrect status

When you commit tax fraud, you may face criminal charges and get a maximum sentence of three years or a fine of up to $100,000. In some cases, you might have to pay an additional amount equal to 75% of the taxes you avoided.

Statute of Limitations for Tax Evasion and Fraud

A statute of limitations is the maximum period that parties in a dispute have to start legal proceedings from when the issue occurred.  The law gives the IRS three years to audit your returns if they suspect you provided wrong information and evaded taxes.

During this period, the body will review your accounts and financial details to track expenses and income.

If they detect that you failed to disclose about 25% of your income, they will hand over the matter to relevant authorities for prosecution. The statute of limitations for such a tax evasion charge will then extend up to six years.

Since tax fraud is not a specific crime, the statute of limitations often differs depending on the issue at hand. For example, if you fail to pay taxes, the duration will be six years. On the other hand, the law provides a maximum of three years to prosecute those who fail to supply some information or keep the required records.

It is important to note that the statute of limitations for tax evasion and fraud can be longer due to various reasons.

For example, if you commit a similar or related crime, authorities will start counting the duration from the date of your last fraudulent act. Besides, when you leave the US, they will stop counting until you go back or they locate you.

Preventing Tax Evasion and Fraud Charges

Tax evasion and fraud have significant consequences on your finances and reputation. Hence, it is vital to avoid such cases by remitting the correct amount and providing accurate information when filing taxes.

If you cannot pay all your taxes in full, consider working with liability experts to apply for installment agreement programs. These can also help you file your taxes to avoid errors that may appear as fraudulent attempts.

Reach Out to Tax Industry to Deal With Tax Evasion and Fraud Charges

When facing a tax evasion or fraud charge, it is crucial to get the proper representation. At Tax industry, we have qualified attorneys to help you navigate tax laws and disputes. These experts can guide you in proving honest mistakes like calculation and typing errors.

If found innocent, we will assist you in choosing a Tax debt relief program to clear your tax debt. Contact us now to consult our liability experts.