What Are the Consequences of Tax Evasion?

The consequences of tax evasion can be severe. Our Seattle criminal defense attorney discusses the definition of tax evasion and the criminal penalties for tax evasion in this article. We also discuss the civil penalties and professional consequences of tax evasion.

Understanding Tax Evasion 

Tax evasion is the willful attempt to avoid having a tax assessed against you. It often involves lying to the Internal Revenue Service (IRS) about your income. Simply stated, tax evasion is an illegal act that artificially reduces your taxable income to lower how much you owe in taxes. Tax evasion also includes the willful attempt to avoid paying your taxes.

Examples of tax evasion include, but are not limited to:

  • Underreporting income
  • Transferring assets to avoid paying tax
  • Claiming credits you are not legally entitled to claim
  • Falsifying dependents on your tax returns
  • Hiding sources of income
  • Holding property in someone else’s name
  • Maintaining a second set of books for your business
  • Destroying tax records
  • Filing a false tax return
  • Lying about your income, assets, and/or resources to avoid paying your taxes
  • Fleeing the country to avoid paying taxes
  • Hiding assets or income to lower your tax bill

Tax evasion is a serious crime. Consequences can include criminal and civil penalties.

Legal Penalties for Tax Evasion

The government can impose several legal penalties if you are convicted of tax evasion. On the federal level, tax evasion is a felony charge. Individuals could be charged with a fine of up to $250,000 and sentenced to up to five years in prison. The fine for corporate tax evasion is $500,000.

Washington state charges tax evasion as a misdemeanor or a felony. You could face fines, jail time, and other penalties based on the exact charges.

Civil Consequences of Tax Evasion

In addition to the criminal penalties imposed for tax evasion, you could face one or more civil penalties. The civil penalties for tax evasion could include:

  • Penalties
  • Interest
  • Restitution (i.e., payment of back taxes)
  • Liens
  • Loss of Social Security benefits
  • Damage to your credit
  • Loss of personal property, including real estate, homes, and vehicles
  • Disqualification from holding public office
  • Loss of voting rights
  • Revocation of your passport

The civil penalties for tax evasion can be expensive. You could lose substantial assets if you cannot afford to pay the financial penalties.

The Impact of Tax Evasion on Professional Reputation

A conviction for tax evasion could have long-term impacts on your job prospects, professional licenses, and public image. If you hold a professional license, the licensing board may suspend or revoke your license for tax evasion. A tax evasion conviction could prevent you from obtaining a job or a professional license.

From a personal standpoint, a conviction for tax evasion can cause embarrassment for you and your family. Corporations found guilty of tax evasion could face a backlash from consumers. It may reduce the value of their brands and harm their reputation.

Talk With a Seattle Criminal Defense Attorney About Tax Evasion Charges

If you face tax evasion charges, schedule a consultation with Seattle criminal defense attorney Jennifer Horwitz. There could be one or more valid legal defenses to the charges. You may have made an honest mistake, but a zealous prosecutor is pursuing criminal charges. An experienced tax evasion lawyer works to have the charges dismissed or reduced and minimize the penalties imposed for a conviction.