White Collar Crime Tax Evasion

If pressed and assured immunity, many Americans would likely admit to exaggerating a tax deduction here and there or disclosing less than 100% of their taxable income. However, a much smaller percentage of people go to great lengths to avoid paying taxes altogether. Those who engage in fraud to avoid paying taxes may be subjected to state and federal criminal tax evasion charges. Therefore, a person who is convicted of tax evasion may face an assortment of penalties, which may be stacked. Tax fraud penalties may include fines, restitution, and even prison time. Always consult with an experienced Naples, Broward County or Ft Lauderdale tax evasion lawyer as soon as you feel you might be under investigation in Florida.

Accidental tax evasion

Although there are people who deliberately commit tax evasions, and even some very notorious criminal organizations have been brought down due to money laundering and tax crimes, there are people who are simply looking to reduce their tax liability through what they perceive as a legal means. Others simply make honest mistakes on tax documents that can result in what falsely appears to be a reduced tax liability. There are several ways a person can accidentally fail to disclose income or falsely claim deductions on their tax returns.

Erroneously claiming the earned income credit

Claiming the Earned Income Credit (EIC) despite not meeting the qualifications for the tax credit can likely trigger an audit. Designed to counteract the burden of paying Social Security taxes for low-to-moderate income taxpayers, the EIC is available to people who meet certain requirements regarding their income, marital status, and number of children they have. People may sometimes claim the EIC without realizing they are no longer eligible if their investment income exceeds a certain amount or if the guidelines have changed from the previous tax year.

Just Arrested?
Do not say anything that might incriminate you. Speak with an attorney first.

Abusing tax shelters

Some wealth planners and accountants tempt their clients with tax shelters that may be deceptive. Examples include insurance policies that offer unnecessary or duplicate coverage or policies that apply to implausible events. Taxpayers who become involved in tax shelter scams often owe large sums in back taxes and fines and may even be convicted and sentenced to up to five years in prison. Individuals who discover they or their company has become involved in a tax shelter scam should immediately contact a tax evasion defense attorney.

Failure to report income

Some Floridians simply do not report all of their taxable income. This is often the case with service workers who earn tips, small family-owned businesses, and people who start a side business and sell products and services for income outside of their main profession. The IRS estimates approximately 40 percent of tips earned by service workers go unreported. Nevertheless, failure to report income can have steep penalties under federal law. Apart from small business owners, sole proprietors, and service professionals, people who have income that is the result of illegal activity also make themselves vulnerable to criminal liability for tax evasion if they do not report the illegal income.

Tax preparer fraud

Another way in which Broward County taxpayers may find themselves in violation of tax laws despite making an honest effort to pay is by using a deceptive tax preparer. Most tax preparation professionals are honest. However, some tax preparers persuade their clients to claim deductions for which they are not eligible in an effort to collect a higher fee for their services. Those who are victims of a tax prep scheme usually avoid criminal liability; however, they may be required to pay what the IRS describes as “significant penalties.”

How tax evaders are caught

With a spread of $450 billion between what the government believes it should be collecting and what it actually collects, the IRS has adopted a combination of tools and strategies to help find those who evade their tax duties. One of the more straightforward tools the IRS employs to detect tax inconsistencies is the computerized Information Returns Processing system (IRP). The IRP system compares information sent by employers to the IRS and other third parties to see if it matches the amounts employees report on their tax returns. It is also believed that IRS computers can track medical records, credit card transactions, and other information electronically. The agency does not share much information on its information tracking capabilities. Similarly, it is also believed the IRS uses social media platforms to uncover lifestyle inconsistencies that may provide clues as to whether a person of interest is indeed evading taxes or misrepresenting the purpose of expensive business tax deductions. While social media posts do not likely trigger an IRS investigation, they may be used to gather evidence about a person or business that is already under investigation. The public should bear in mind that federal law permits government agencies to view, without obtaining a warrant, emails that have been stored on a third-party server longer than 180 days. An individual may also be legally compelled to reveal non-public social media posts, even if the posts are incriminating. Finally, the IRS rewards whistle-blowers, people who come forward to inform the IRS about individuals and businesses that commit tax evasion. Some people report others for as revenge or to claim the reward while others lack a personal motive, but may simply want the IRS to know about the activity.

Evasion vs. avoidance

Taxpayers should note there are completely legal ways of lowering income tax liability that do not constitute tax evasion. These permissible methods are often referred to as tax avoidance. Examples of legal tax avoidance include:

  • saving for college;
  • funding an HSA account;
  • using a home equity loan;
  • paying interest on college tuition;
  • contributing to a tax-advantaged retirement account;
  • capitalizing on legitimate business expenses.

Retain a Broward County defense attorney

Many in Broward County assume only high-ranking members of criminal organizations are prosecuted for tax evasion. However, it can happen to virtually anyone who deliberately hides or misrepresents large sums of taxable income when reporting to the IRS. Florida Individuals and businesses being investigated for tax evasion should contact a Naples or Fort Lauderdale tax evasion lawyer to learn about options that may minimize criminal liability.