Thanks for joining us here at The Kronzek Firm again for this series on fraud crimes in Michigan. So far we have discussed credit card fraud and embezzlement, and what those charges mean here in the Great Lakes state. Moving on we are going to unpack the subject of tax evasion for you, and take a look at what that charge involves.
What is tax evasion?
Tax evasion, also sometimes called tax fraud, is quite simply, the illegal nonpayment or underpayment of taxes. In other words, not paying the taxes that you are required to pay by the state of Michigan or the US government. Not paying your state or federal taxes is a crime, and if caught, you will likely face very serious criminal charges.
Is tax evasion the same as tax avoidance?
Although many people use the terms ‘tax avoidance’ and ‘tax evasion’ interchangeably, they are very different concepts. To put it in a nutshell, tax avoidance is legal, while tax evasion is not.
Tax avoidance is the legitimate minimizing of taxes, using methods that are approved by the IRS. For example, people and companies can avoid taxes by claiming legitimate deductions, setting up tax deferral plans, and taking tax credits, all of which are legal.
Tax evasion, on the other hand, is the illegal practice of not paying taxes legally owed. This is done by not reporting income, reporting expenses not legally allowed, or by not paying taxes owed.
What counts as tax evasion?
Tax evasion isn’t one specific crime. Rather, it is a term that can refer to numerous different types of criminal activity, all of them pertaining to ways that a person illegally avoids paying taxes. This can be done in many different ways, including:
- Not filing an annual tax return
- Underreporting your income
- Claiming false deductions
- Overstating expenses or deductions
- Claiming personal expenses as business expenses
- Failing to collect and pay employment taxes
- Violating employer withholding requirements
- Making false statements to investigators
What are the penalties for tax evasion?
Tax evasion can be prosecuted either by the state of Michigan, or by the Federal government. Our state’s criminal code has different punishments for tax evasion than the feds do, so in order to answer this question, we have to give you two answers.
Under Michigan law, failure to file a tax return, submitting a false tax return, payment with intent to defraud, aiding and abetting tax evasion, and filing false returns with intent to defraud are all felonies. If you’re convicted of any of these crimes, you could face up to five years in prison, with fines of up to $5,000, or both.
Under federal law, an individual convicted of tax fraud is also facing up to five years in prison, but the fines of up to $100,000 are significantly higher. For a corporation faced with the same charges, the fines are raised to $500,000. An individual convicted of filing a false tax return could be sentenced to a maximum of 1 year in prison, $10,000 in fines, or both. A corporation guilty of this crime would have the fines increased to of $10,000.
What do I do if I’m charged with tax evasion?
As we’ve said before, there is only one thing to do if you’re charged with a fraud crime – or any crime for that matter – call The Kronzek Firm immediately 866 766 5245! Our criminal defense team works with our tax experts including CPAs, forensic accountants, Enrolled Agents and other investigators as needed. Facing criminal charges in Michigan is very serious, and you should not go it alone.
Join us next time for the next installment, when we will be talking about organized retail crime. Until then, if you or a loved one have been accused of tax evasion or any other financial or fraud crimes in Michigan, talk to our team of highly skilled criminal defense attorneys. We have spent decades successfully defending the people of Michigan against all types of criminal charges, and we can help you too!