Although the tax code is complex, the IRS generally recognizes two types of tax evasion. It is important for taxpayers to be familiar with what those two types are and that there are legal protections available if they have been accused of committing tax evasion and are facing criminal tax charges.
The first type of tax evasion recognized by the IRS includes taking an action to evade the assessment of tax. This type of tax evasion can include underreporting of taxes as an attempt to evade taxes the taxpayer owes or are due. It is important to understand that this type of tax evasion requires a showing of more than negligence or that the taxpayer made an innocent mistake in reporting.
Another type of tax evasion recognized by the IRS is evading payment of taxes. This requires affirmative actions be taken to conceal money or assets upon which taxes would need to be paid. It is important to note that simply failing to pay taxes owed is not considered tax evasion. For it to be proven that the taxpayer was attempting to evade payment of taxes, they would need to take steps to conceal money or assets, such as placing them in a foreign account or a family member's account.
Examples that may be considered tax evasion can include: filing a false tax return; keeping two sets of books; destroying records; making false invoices; concealing sources of income; overstating deductions or holding property in another person's name. Tax evasion can result in criminal charges, so it is important for taxpayers to be familiar with what tax evasion is and understand there are legal resources available to them if they have been accused of tax evasion.