As a West Virginia taxpayer, you undoubtedly accord a great deal of respect to the Internal Revenue Service. You undoubtedly also realize that this governmental entity has enormous powers. Consequently, you may occasionally have worries or fears that you somehow failed to correctly calculate your taxes and about what the IRS might do should they discover such an error.
Regardless of whether you prepare your own tax returns or hire someone else to prepare them for you, you and they are only human and human beings make mistakes. Rest assured that the IRS will not prosecute you for tax evasion for a mere calculation error or other inadvertent mistake. The IRS reserves criminal tax evasion charges for those whom it believes have deliberately attempted to understate their income or overstate their deductions.
Examples of tax evasion
Bear in mind that as in all criminal prosecutions, the plaintiff, in this case the IRS, bears the burden of proving beyond a reasonable doubt that you evaded paying the taxes you owe should it accuse you of criminal tax evasion. Under most circumstances, this means that it must prove that you deliberately did one of the following:
- Refused to file one or more of your income tax returns
- Filed one or more false tax returns
- Concealed your income sources and amounts or otherwise failed to report them
- Overstated your deductions
- Destroyed your underlying financial records
- Held assets in someone else’s name
Criminal tax evasion penalties
If the IRS sustains its burden of proof and convicts you of criminal tax evasion, you face severe penalties including the following:
- Incarceration in a federal prison for up to one year plus a maximum fine of $100,000 for each year you failed to file a tax return
- Incarceration in a federal prison for up to three years plus a maximum fine of $100,000 for filing a fraudulent return
- Incarceration in a federal prison for up to five years plus a maximum fine of $100,000 for misrepresenting or concealing your financial information
- Incarceration in a federal prison for up to three years plus a maximum fine of $250,000 for failing to pay your taxes
Civil versus criminal tax evasion
You should also bear in mind that the IRS can sue you in civil court for tax evasion as well as prosecute you criminally. Naturally you cannot go to prison if “convicted” of civil tax evasion. Nevertheless, the IRS has a lower burden of proof in civil cases as compared to criminal prosecutions. In addition, virtually no statute of limitations constrains it in a civil case. This means that it could file suit against you at any time in the future once it believes you cheated on your taxes. It likewise means that if a judge or jury finds that you deliberately failed to file your tax return(s) or pay your legitimate taxes, you not only will have to pay the taxes themselves, but also substantial interest and penalties thereon.