Whether you like it or not, as a US citizen, you are required to pay taxes to the government. The government in turn uses this money to fund projects to help the citizens. This article focuses on the tax laws in California and the repercussions for not filing taxes.
What is tax evasion?
Tax evasion falls under the category of White Collar Crime. To commit tax evasion is to not pay taxes or to make false statements on a tax return in order to pay fewer taxes. The action must be willful and intentional. Tax evasion is illegal for both personal and corporate taxes.
What is not tax evasion?
It is not tax evasion to work within the legal tax codes in order to pay fewer taxes. This is known as tax avoidance or tax minimization, and a US citizen is allowed to do so long as the person complies with the tax code.
Speak with a CPA who understands the tax codes to help you to reduce your taxes.
Pro Tip: Talk to a CPA well before personal tax season (January – April) in order to figure out how to pay fewer taxes for the next tax year. Your CPA will have the time to sit down with you then.
What are examples of tax evasion?
- Hiding Income. A side hustle that brings in money will need to be taxed. Not listing the additional income on your tax return is considered to be tax evasion. For example, a person sells trinkets out of their home. They also have a full time job. California requires that the person list both their main income and their side job on their tax return.
- Overreporting or underreporting information. Inflating or deflating numbers on one’s tax return is unlawful and considered to be tax evasion. Reporting false deductions or less income in order to get a better tax rate is not allowed. For example, if someone makes $100,000.00 a year but reports only $60,000.00 to be able to qualify for certain tax benefits, this is tax evasion.
What is a tax audit?
To audit means to assess compliance. In the case of taxes, the IRS can request the documents (such as financial statements) that were used to prepare the tax return in order to see how a person or accountant came up with the numbers and amounts owed. It is important to comply with the audit. If the auditor does not see any issues with the return, they will not continue with the case against you.
Can you go to jail for not filing taxes?
Yes, you can go to jail or prison for not filing taxes. A person can be sentenced for up to one year in jail for misdemeanor tax evasion or up to three years in prison for felony tax evasion.
The evader may also need to pay a fine of up to $20,000.00 for personal taxes and all unpaid taxes will need to be paid as well. These unpaid taxes are known as back taxes. If you do not have the funds to pay the back taxes, the state can seize your property and sell it to pay back the owed taxes.
California also has a list of people on their website who have evaded paying taxes, both personal and corporate. This is a public site that anyone can access.
What is the statute of limitations for tax fraud?
The statute of limitations for the State of California Franchise Tax Board (FTB) to issue a tax return assessment is about four years from the date that the return was filed. If it is found that you committed tax fraud, you can be charged with the crime. If you did not file a return, the FTB can issue the assessment at any time.
Defenses
- The Statute of Limitations has run out. If the FTB learns that a person committed tax evasion after the statute of limitations runs out, the person can claim that they cannot be charged with the crime.
- Honest mistake. Maybe the filer was tired or misunderstood the instructions. If one can prove that they did not willfully intend to commit tax evasion, the FTB will drop the charges against the individual.
Let Our Bakersfield Lawyer Fight For You
White-collar crimes are essentially common law crimes that individuals have to be wary of. When facing charges for such a crime, choosing an attorney who practices white-collar crimes is essential.
Our Bakersfield white-collar crime lawyers have knowledge about the various ways fraud and other white-collar crimes happen. With their vast knowledge, they can have a solid defense for your case. Contact us today to get a case evaluation.
