The Term “Income Tax Evasion” actually describes a few different types of criminal tax acts. The most well known, Felony Income Tax Evasion, is defined as a willful attempt to evade or defeat any tax or payment of any tax and is punishable by imprisonment for up to five years and fine of up to $100,000 for individuals and up to $500,000 for corporations. The closely related charge of willful attempt to evade taxes, is by far the more commonly charged crime under the umbrella of “income tax evasion”, and is defined as an attempt to evade the government’s effort to ascertain a citizen’s tax liability or to avoid determination or assessment of the tax. Lastly, willful attempt to evade the payment of taxes, involves an attempt to evade payment of taxes that have already been determined to be due.
An individual or entity can be charged with tax evasion as to any tax imposed by the Internal Revenue Code (IRC), including income, estate, gift, employment, and excise taxes. The income tax evasion provisions were intentionally drafted in sweeping language and were designed to cast a wide net that captures a wide spectrum of criminal behavior. Moreover, since the statute applies to any “person” who attempts to evade or defeat any tax, and the term “person” in this context carries a very broad definition under the IRC, it has been interpreted by the courts to apply to attempts to evade another’s taxes as well. For example, an partner in a partnership may be convicted of attempting to evade the partnership’s taxes even though no taxes are typically paid at the partnership level. Similarly, an accountant or attorney may be convicted of attempting to evade the taxes of his or her client by preparing an intentionally fraudulent return, or an executor or surviving spouse may be convicted of attempted evasion of an estate tax liability by substantially understating the estate tax liability on an estate tax return. Finally, the attempt may apply to any intentionally fraudulent action taken to reduce a tax liability such as purposefully omitting income, overstating or claiming false deductions (such as claiming personal expenses as business expenses), or claiming overstated or false credits.