Even if you have good reason to believe the IRS requires you to pay more than you should, evading your responsibilities can have costly repercussions because it is against the law.
Your understanding of why this practice could have consequences may give you the incentive to come up with a different plan. Learning more about taxes and knowing your rights can help you identify your next steps.
Identifying a problem
The IRS cannot fault you for tax evasion without clear evidence that you have gone to some length to conceal information to avoid paying your taxes. They will also need to identify an intent to avoid payment. Tax evasion might include the following:
- Underreporting your income
- Concealing taxable assets
- Claiming ineligible deductions
- Failing to report interest earned on loans
Each of these behaviors could result in costly fines or imprisonment.
Rectifying the situation
At the earliest sign of suspicion from the IRS, take immediate action to correct misunderstandings. According to the IRS, the tax system in the United States requires voluntary compliance. You must accurately report all your earnings, including tips from legal activities such as food delivery and pet sitting. Concealing such earnings could cause the IRS to incur a penalty in a roundabout way.
The sooner you can correct your course, the more control you have over the consequences you face. Communicate with the IRS to learn about your options. Document your situation and keep records that will provide support for your claim. Make sure you know your rights so you can advocate for yourself and clarify any misunderstandings.