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.
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.
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.
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:
- Offering IRS audit representation
- Applying for an IRS hardship program
- Requesting the IRS to lift tax liens
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.