What is the Difference Between Tax Fraud and Tax Evasion?

Tax fraud and tax evasion both involve lying to the IRS about your taxable income and tax obligations, but tax evasion carries a higher burden of proof and harsher criminal penalties.

Math and unexpected financial losses are two things that most people dread, so filing income tax returns fill most of us with trepidation. You go into the tax preparer’s office daydreaming about the vacation, gadget, or piece of furniture that you will buy with your tax refund money, but you leave feeling crestfallen because the tax credits and deductions that afforded you your sizable tax refund last year are no longer available, or if they are, you no longer qualify for them. 

Meanwhile, if you prepare your own taxes and you make a calculation mistake (such as if you enter numbers into a calculator or spreadsheet and end up entering the wrong numbers on your tax forms), you will have to pay even bigger financial penalties when the IRS finds out. These innocent mistakes do not count as tax fraud or tax evasion, and you cannot be charged with a crime because of them. Tax-related crimes involve intentionally lying to the IRS about your financial situation to decrease your tax obligations. Tax fraud and tax evasion overlap considerably with each other and with other financial crimes, but a Gwinnett County financial crimes defense lawyer can help you fight charges related to tax fraud or tax evasion.

The Crime is the Same, but the Legal Implications are Different

Tax fraud and tax evasion are when a taxpayer intentionally makes false statements to the IRS that would affect the tax obligations assessed for them, or when they intentionally conceal relevant information from the IRS. You can be charged with a crime for making these intentional misrepresentations on your personal income tax returns or on the tax returns of a businesses you control. How does the prosecution prove that the false statements were lies instead of just factual errors? These are some types of evidence they might present:

• Intentional destruction of records.
• Keeping more assets in cash than is appropriate for a given type of business, to make the source of the money less traceable.
• Titling assets in other people’s names while retaining de facto control of the assets.
• In some cases, the same person might be charged with tax crimes and money laundering or embezzlement in connection with the same business.

Tax evasion carries heavier penalties than tax fraud, so it tends to involve larger amounts of money and more egregious acts of misrepresentation. The statute of limitations for tax fraud is 3 years, but for tax evasion it is 10 years. Likewise, to convict a defendant of tax fraud, the prosecution must show clear and convincing evidence that the defendant is guilty, but for tax evasion, the standard of evidence is beyond a reasonable doubt.

Contact Zimmerman & Associates About Tax Crimes Defense

An Atlanta financial crimes defense lawyer can help you if you are facing criminal charges for tax fraud or tax evasion. Contact Zimmerman & Associates in Norcross, Georgia to set up a free consultation.