Tax evasion is an illegal activity in which a person or entity deliberately avoids paying a tax liability. In other words, if you knowingly fail to report all of your taxable income or you conceal assets or earnings, you have committed tax evasion. It is a serious crime that carries criminal charges and penalties. For the IRS to determine tax evasion, the agency must be able to show that the avoidance of paying taxes was willful on the part of the taxpayer and it applies to both the illegal nonpayment as well as the illegal underpayment of taxes.
The federal tax code separates tax evasion into two categories:
- willful attempts to avoid assessment
- willful intent to evade tax payment
Between tax evasion and tax fraud, tax evasion is always a criminal act whereas tax fraud can either be civil or criminal. Evasion usually results in criminal prosecution and harsher penalties. Federally, it is a felony punishable by up to five years in prison and a fine of up to $250,000 for an individual and $500,000 for a corporation. However, in North Carolina, tax evasion is classified as a Class 1 felony that carries a maximum prison sentence of 15 years. At Sandman, Finn & Fitzhugh, we fight these charges aggressively and pursue appeals if necessary.
Federal and State of North Carolina Penalties for Tax Evasion
Both the Federal government and North Carolina have penalties for tax evasion. If you are found to have willfully and deliberately evaded paying your taxes, you can be liable for payment of any taxes that have been left unpaid as well as found guilty of official charges and may have to serve jail time.
According to the IRS, in addition to bearing the costs of prosecution, penalties can include:
- Jail time of no longer than five years,
- A fine of no more than $250,000 for individuals and $500,000 for corporations, or
- Both jail time and a fine
In North Carolina, tax evasion is classified as a Class 1 felony that carries a maximum prison sentence of 15 years. The following lists the main provisions of N.C. tax evasion laws as outlined in NCGS § 105-130, et seq.
- 5% of unpaid tax as a monthly penalty that cannot exceed 25% of tax total
- 10% late payment penalty
- 20% collection assistance fee on any tax, penalty, or interest that is not paid within 90 days of the due date
- 50% penalty if found guilty of tax evasion
What to Do When Charged with Tax Evasion
Federal and state prosecutors must prove a deliberate act of dishonesty occurred when you are charged with tax evasion. The prosecution will be aggressive in attempting to prove their case before a grand jury, There are times when an indictment may have been obtained that wasn’t warranted. Many times, pressure is applied on a defendant to plea bargain before indictment.
It’s imperative to find an attorney who has experience and is familiar with the federal court system as soon as the investigation begins. Regardless of whether a mistake was made by underpayment or not, the case can require complicated planning and strategy. Attorneys such as Sandman, Finn & Fitzhugh who are experienced in tax law can construct a defense involving planned payment installments, amendments to past returns, and other methods to satisfy the IRS.
Contact Our Tax Evasion Attorneys in Raleigh Today
Being charged with tax evasion disrupts your life and can have long-term consequences such as prison time and a criminal record that affects your ability to work. To schedule a free case consultation, contact our Raleigh tax evasion attorneys at (919) 845-6688 or complete our online form to get started.