We have what is called a “self-assessment” tax system, also known as a “voluntary” system. “Voluntary” in this context doesn’t mean that we can choose whether or not to pay taxes. It means that it is up to us to figure out our own tax liability instead of having the government simply send us a bill. Partly because of this, there are various criminal penalties designed to encourage people to pay and accurately file their taxes.
The most common tax-related crime is tax evasion, also known as tax fraud. This occurs when a taxpayer purposefully tries to avoid paying taxes imposed on him or her by the federal government. It is different from tax avoidance, which occurs when a taxpayer legally uses the tax system to his or her advantage and therefore reduces the amount of taxes owed.
In the United States, the IRS (Internal Revenue Service) collects taxes and enforces the Internal Revenue Code. There are many ways that people use to avoid paying their taxes. One common way is to overstate the amount donating to charities, which are tax deductions. Some people also use foreign tax havens, such as Swiss banks. Dependent on their use these can either be legal or illegal, and recent developments have made this distinction much more clear. Another form of tax evasion is the failure to report unlawful gains as income as a part of annual tax returns. However, for obvious reasons, this type of income is rarely reported. There have been many cases where people who are suspected of illegal activity have been found guilty of tax evasion while there was not evidence to convict them of other crimes. One famous example of this is Al Capone.
The IRS has the right to carry out investigation as to the accuracy of tax returns, and the right to collect income tax and require information from taxpayers including records and papers. It also has the right to conduct audits if it suspects people of tax crimes, or on a random basis as a means to estimate the total noncompliance. However, the IRS itself is not able to prosecute crimes. It has the right to only impose monetary penalties and require that the taxes in question be paid.
Massachusetts General Laws Chapter 62C governs taxation in our state. Section 73 of Chapter 62C makes it a felony punishable by up to 5 years in prison to willfully evade or defeat any tax.
Federal law also provides for criminal punishments. Section 7201 of the United States Code (Title 26) makes federal tax evasion a felony. Section 7202 makes it a felony to willfully fail to collect, account for or pay a tax. Section 7203 makes it a misdemeanor to willfully fail to file returns, keep records or pay a tax. Finally, section 7207 makes it a misdemeanor to willfully file a false or fraudulent document. Criminal charges for tax crimes come from the United States Department of Justice, and possible punishments for those found guilty include prison time and fines.
Speak with a Boston Criminal Lawyer 617-512-0939
Tax crimes are considered white collar crimes because they are non-violent and involve cheating as their central element. If you would like to speak with a Massachusetts white collar crimes lawyer, call Francis T. O’Brien Jr. of O’Brien Law Boston today at 617-512-0939. There will be no fee to discuss your case, and all information will be kept confidential.