How to Think Like a Tax Lawyer – Be Aware of Costly Tax Evasion Schemes to Avoid IRS Tax Problems
FACT: The IRS reports that tax evasion is a widespread problem that grows each year costing the government an estimated $350 billion in unpaid taxes and creating a tax gap that grows by 10% each year.
FACT: The additional tax burden falls on shoulders of honest Americans.
FACT: Public services that are supported by tax dollars are affected as well.
FACT: Buying into tax evasion schemes can and will be costly, either in civil or criminal penalties or both, even imprisonment.
The Internal Revenue Service has identified small business and sole proprietorship owners as the largest contributors to the tax gap. Without significant investigations, there is no way for the government to control skimming or non-reported income by individuals who are self-employed or run small businesses.
While there are huge tax evasion activities happening all over the world, it has been estimated that the United States Government has collected roughly $350 billion less than it is owed by American taxpayers. We’re already seeing the IRS cracking down on both small businesses and individuals who evade their taxes with an increase in tax audits and aggressive collection tactics, including bank levies.
Tax evasion is not to be confused with tax avoidance. The biggest difference? One is legal, the other is a crime. Tax avoidance is when someone works within existing laws to pay the least amount of taxes that the IRS says are due. Tax evasion, on the other hand, is when someone intentionally works outside of existing laws by not paying the taxes that are owed to the IRS.
And you don’t have to be a tax lawyer to know the red flags that cause the IRS to suspect tax evasion. If you intentionally fail to report your business cash receipts, including checks that are cashed at the maker’s bank, the IRS has specific audit programs that will investigate this activity. Also, if the amount of income reported on your tax return far exceeds the previous year’s – you will be flagged as suspect! Additionally, if you are one of those “do-gooders” that helps others to file fraudulent tax returns and accept payment for this… that could be a problem.
Tax evasion encompasses any cheating of the government in taxes. Tax evasion is a felony and can carry up to a 5-year prison sentence and/or IRS penalties up to $100,000. Even in the current enforcement climate, taxpayers can learn how to save money by taking advantage of legal tax deductions to reduce their IRS bill. Additionally, anyone who owes back taxes or is being audited by the IRS will need to know that there are options for negotiating a tax resolution. Working with a tax resolution specialist or tax lawyer can greatly increase your chances of successfully resolving your IRS tax problems. However, it’s important to be informed in the first place so you can avoid becoming a target of aggressive IRS collection efforts that can financially cripple you for life.