If you are like most North Carolinians, you have a deep respect for, if not an actual fear of, the Internal Revenue Service and the extraordinary powers it possesses. You therefore likely do your very best to make sure you correctly compute your taxes and file your income tax return on time each year, along with paying any taxes you owe.
Nevertheless, you sometimes worry that you inadvertently made a mistake. Will the IRS come after you? Will it charge you with tax evasion? In all likelihood, the answer is a resounding “no.” The IRS undoubtedly will question you about any mistakes it finds on your tax return or in the amount of taxes you paid as a result thereof. It will not, however, charge you with tax evasion unless IRS agents believe that you deliberately sought to understate your income and/or sought to overstate your deductions.
Tax evasion instances
Merely making a calculation error or even committing negligence when preparing or filing your tax return does not rise to the level of tax evasion. As stated, to file such charges against you, IRS agents must believe you did something deliberately, such as one of the following:
- Refused to file your income tax return
- Filed one or more false tax returns
- Concealed your income sources and amounts
- Overstated your deductions
- Held assets in someone else’s name
- Deliberately destroyed your financial records
Tax evasion penalties
Keep in mind that the IRS bears the burden of proof when it comes to backing up its tax evasion allegations against you. If it meets its burden, however, you face serious consequences upon conviction of various charges, including the following:
- Failing to file your tax return: up to one year in federal prison plus a maximum $100,000 fine for each year you failed to file
- Filing a fraudulent return: up to three years in federal prison plus a maximum $100,000 fine
- Concealing or misrepresenting financial information: up to five years in federal prison plus a maximum $100,000 fine
- Failing to pay your taxes: up to three years in federal prison plus a maximum $250,000 fine
Obviously, tax evasion is not worth the risk of getting caught. While the IRS normally has three or six years to bring criminal charges against you, depending on precisely what it alleges you did, these statutes of limitation do not apply in certain circumstances. In addition, there is no statute of limitations for a civil suit the IRS may file against you for various forms of tax evasion. While civil suit “convictions” cannot result in a prison sentence, that is your only “relief.” The IRS can still go to whatever extent legally necessary to collect your back taxes plus interest and penalties.