What is Tax Evasion?
Also known as Tax Fraud, Tax Evasion is an illegal activity that involves the nonpayment of taxes one owes. This means that a person deliberately avoids paying a true tax liability and does not report any of it. If someone earns income and hides it, it’s a crime that’s punishable by fine, imprisonment, or both. Failing to pay taxes represents a federal offense under the Internal Revenue Service (IRS) tax code.
It is considered tax evasion or fraud when:
- False exemptions or deductions on a tax return are claimed
- Fake documents are created
- Kickbacks are accepted (payment for facilitating a transaction)
- Taxes are not paid
- Reports on income are not done
- Legitimate documents are altered
- A false social security number is used
- Personal expenses are claimed as personal business
What is the Difference Between Tax Evasion and Tax Avoidance?
The difference between these two is that Tax Evasion is illegal, and tax avoidance is not. When a person takes illegal measures to avoid paying taxes, then he or she is committing a crime. On the other hand, tax avoidance is when tax laws are used for benefits in ways not originally intended by the law, like finding loopholes to avoid paying as much taxes as you can and all to reduce tax liability. Even so, tax avoidance may result in other consequences.
Is tax evasion considered a misdemeanor or felony in California?
According to section 19706 of the California Revenue and Tax Code, tax evasion is commonly considered a felony, facing a one year in state prison. Fines for tax evasion are of up to $20,000; which is the same for a misdemeanor and a felony tax evasion conviction.
Section 19706 states that for any individual, company or officer, it’s illegal to purposely file a false tax return, or failing to file a tax return in the state. This crime is considered under the California Penal Code as a “Wobbler,” which means that it can be charged as a misdemeanor or felony, depending on the facts of the case. Tax evasion can result in a trial and jail time for the evader.
Misdemeanor vs. Felony
Misdemeanors are punishable by substantial fines or jail time, but most misdemeanors are adjudicated in a shortened trial; and if the defendant is going to serve any jail term, then it would most likely be served in a local or county jail. On the other hand, a felony is the most serious type of crime and is often classified by degrees – being the first one the most serious. A felony is punishable by substantial fines and prison sentences that exceed the year. If a defendant is convicted of a felony, then jail time will be served in a state or federal correctional institution.
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