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Understanding Tax Evasion

Understanding Tax Evasion

Tax evasion is a crime that is committed often in the United States and other nations as people attempt to defraud tax authorities and conceal financial information. Many cases of income tax evasion are investigated by the Internal Revenue Service (IRS) in the United States as discrepancies and false tax information are uncovered by agents of the IRS. These investigations into tax evasion have uncovered new, varied methods of deceiving the federal government, all of which are illegal under United States tax law.
It is important to note that tax evasion is different from tax avoidanceThere are many methods of income tax income tax evasion that people commit every year in hopes of retaining their income and concealing the source of that income. Some of these methods include falsifying financial records, masking expenses and simply not paying taxes. There are other means of tax evasion, but these are some of the most common.
Falsifying financial records encompasses several different actions which are intended to deceived tax authorities. One such method is filing a false tax return which presents a person’s income as less than it actually is in order to receive tax relief. Another method is by having “two books”, or different financial records of transactions. One book is presented as being the proper information used for taxation purposes while the other contains the true financial records and transactions that occurred. The term “cooking the books” is used when someone falsifies financial records in this manner.
Masking expenses typically involves someone making it appear as though personal expenses are in fact business expenses in order to receive some forms of tax relief. This form of income tax evasion is often difficult to uncover through the involvement of other parties such as accountants and tax attorneys which have a better knowledge of the taxation process.
Not paying taxes is the simplest form of tax evasion, though it is the most blatant. Should someone stop paying taxes, or there is no record of income taxes ever being paid, the Internal Revenue Service is able to notice these disparities and conduct an investigation into the person’s financial records and impose penalties.
Income tax evasion comes in many forms as it can be committed by individuals or businesses in varying degrees. Most individuals commit this crime in order to conceal the source of income, which may be illegal as evidenced in many cases of tax evasion. As for businesses, many investigations into income tax evasion are lengthy and arduous due to the infrastructure of the business. Also, should the business have a team of lawyers and accountants, navigating the course of financial transactions can be difficult for agents of the Internal Revenue Service.
The effects of income tax evasion can be felt on both a minute and broad scale. The individual who committed the fraudulent act, as well as those close to him or her, will be affected by the investigation and prosecution of that individual. Outside of that microcosm, the national and global economy are affected as funds are not available to pay for public services such as roads, government-sponsored healthcare, retirement plans among others.



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