Here Are Five Examples of Common Tax Evasion
One of the easiest ways to get on the IRS’ wrong side is by committing tax evasion. People who commit tax evasion are aware they are doing it, and it’s wrong. They hope they won’t get caught. Tax evasion is a felony, and the legal consequences are rather stiff.
Tax evasion is a crucial matter because it reduces the amount of taxes paid and leaves the state short of funding. It’s the same as stealing from the country, and it will get you into real trouble with the IRS. What if you made a mistake? The IRS is very good at determining mistakes and purposeful evasion. If unpaid taxes is due to lack of funds or accidental errors you can contact Randolph Law Firm. Errors include copying down wrong information, calculation errors, transposition errors, and obvious errors while filing your tax forms. Examples of tax evasion include:
1. Falsifying records
One way taxpayers falsify records is by lying to their CPA. Your CPA usually sends a questionnaire to fill out, which provides the accountant with all the numbers needed for the tax return. If you misrepresent any information like an offshore account or not reporting all your accounts to pay less tax, it’s deemed tax evasion.
2. Underreporting income
Tax liability is usually based on the amount of income you make. If you change the numbers and write lower numbers, then it means lower taxes. It may be tempting for you, but don’t do it.
Another way people underreport their income is through structuring. Structuring is a method of falsely lowering your withdrawals, deposits, and transfers to a point below bank reporting requirements since it’s usually done to avoid detecting your actual income; it’s a crime. The IRS has tried to pursue this issue relentlessly since the implementation of the Foreign Account Tax Compliance Act (FATCA).
3. Hiding interest
Most people won’t hide their money in holes or put it under their mattresses. However, they hide it in offshore accounts where they hope the federal government won’t find it. Interest can pile up fast for people who have millions stashed in foreign banks. This is where the IRS strictly enforces FATCA to tackle this very issue.
4. Purposely underpaying taxes
Maybe you don’t like the number http://www.taxfyle.com/ came up with, so you deliberately pay a lower amount than what you owe. That’s easy for the IRS to see that you’re committing a felony.
Another way is through money laundering. Let’s say an overseas vendor owes you business money, and instead of asking for cash, you tell the vendor to purchase things for you. Then, you transfer the goods through a third party and call it a gift. There will be no cash income to report because you willfully bypass the reporting by saying you received a gift worth what the vendor owes you.
5. Illegally assigning income
People also hide money by saying the income belongs to someone else, maybe a family member or a friend. If you deliberately assign income that’s yours to reduce your taxes, it’s tax evasion.
Please ensure you adhere to all the IRS rules and regulations to avoid getting in trouble.