Texas Tax Evasion Legal Overview

We are aware that the process of filing taxes can be quite perplexing. The numerous forms to complete can induce stress. But some people go a step further and purposely give wrong information about their money to pay less in taxes. Even though it might not seem like a big deal, this is called tax evasion or fraud, and it’s a serious crime with big consequences.

In Texas, tax fraud, or tax evasion, can lead to state or federal charges, potentially resulting in lengthy prison sentences and substantial fines. Being accused doesn’t automatically mean guilt; prosecutors must prove the accused knowingly broke the law. However, there are ways charges could be dropped, which we’ll explore in this blog.

What is Tax Evasion?

Tax evasion is breaking the law to avoid paying taxes, whether for individuals or business expense. It’s not the same as tax avoidance, which is legal and involves smart planning within the rules. In Texas, there’s no personal income tax, but businesses can still attempt to evade taxes.

It’s crucial to understand that an honest mistake is different from purposely avoiding taxes. Mistakes can result in IRS penalties, but evading taxes can lead to serious criminal charges.

Common Scenario Results in Tax Evasion Investigation

When the Texas Comptroller and Internal Revenue Service (IRS Tax) investigate tax evasion, they look for certain signs, often called “red flags.” While these signs don’t always mean tax evasion, they can be indicators. If any of these are a concern in your case, it’s important to handle them carefully with the assistance of a Texas tax evasion attorney:

  • Not filing tax returns
  • Not making estimated tax payments
  • Insufficient documentation to prove what’s in your tax returns
  • Mostly using cash or cryptocurrency
  • Ignoring messages from revenue agents or not cooperating during an audit or investigation

While these issues may seem serious, there could be valid explanations for them. Not all underreporting or underpayment automatically leads to criminal tax evasion. Proving tax evasion requires the government to show evidence of knowing and willful actions. Challenging the government’s evidence can be an effective defense in many cases.

Difference Between Tax Evasion and Tax Avoidance

Tax Evasion

  • Definition:

Tax evasion means using illegal tricks to purposefully say you earned less income, spent more than you did, or did sneaky things to pay less in taxes. Doing this is against the law, and it’s considered a serious crime.

  • Legality:

It’s not allowed and goes against the rules of tax laws. If caught, there can be severe outcomes, like getting criminal charges, having to pay fines, and even going to prison.

  • Intent:

Tax evasion is when someone knowingly tries hard to not pay the full amount of taxes they owe to the government.

  • Consequences:

Getting caught for tax evasion can lead to criminal charges, fines, and time in jail. There might also be extra fees for the unpaid taxes.

  • Examples:

Some examples of tax evasion include hiding how much money you made, saying you spent more than you really did, using fake papers, or doing tricky things to avoid paying the right amount of taxes.

Tax Avoidance

  • Definition:

Tax avoidance means using legal ways to reduce your taxable income. This often includes smart planning, like using available deductions, credits, and loopholes allowed by tax laws.

  • Legality:

Tax avoidance is totally legal and follows the rules of tax code regulations. People are encouraged to use legal methods to lower their tax bill.

  • Intent:

Tax avoidance strategies is to plan finances carefully to pay less in taxes but always within the law. It’s about taking advantage of the rules to benefit the taxpayer.

  • Consequences:

Tax avoidance usually doesn’t lead to legal trouble because it involves following all the tax laws and rules.

  • Examples:

Examples of tax avoidance include using tax credits, deductions, and legal loopholes to lower the amount of money that gets taxed. This can include things like putting money into retirement accounts or using tax benefits for businesses.

State and Federal Tax Evasion Consequences

Tax evasion charges are a big deal in Texas, and you could face them at the federal or state level if you intentionally don’t pay your taxes. The seriousness of the charge depends on how much you owe:

  • If it’s less than $1,500, it’s considered a misdemeanor.
  • For amounts between $1,500 and $20,000, it’s a state jail felony, and you might end up in jail for at least 180 days.
  • If it’s between $20,000 and $100,000, it becomes a third-degree felony, carrying a prison sentence of two to ten years.
  • Owing between $100,000 and $200,000 makes it a second-degree felony, resulting in two to twenty years in prison.
  • For amounts over $200,000, it’s a first-degree felony, and you could face imprisonment for five to ninety-nine years.

If you purposefully commit tax fraud, not by accident, you might face these charges, and the punishments are:

  • Tax evasion: Up to five years in prison and a fine of up to $250,000.
  • Fraud and false statements: Up to three years in prison and a fine of up to $250,000.
  • Willful failure to file a return: Up to one year in prison and a fine of up to $100,000.

Arrested? Don’t Plea, Call Me!

Are you currently facing allegations of tax evasion? You really need an experienced criminal defense attorney. The strategies like proving no intent, relying on expert advice, disputing calculations, and knowing time limits stress the importance of legal help.

In Texas, where tax laws are complex and consequences serious, having a lawyer is vital. It’s not just about knowing the rules but also about protecting your rights and future strategically.