Answer: Tax fraud, just generally, is committed when a person knows they owe federal or state taxes and then they avoid trying to pay those taxes. As far as the federal system those crimes and penalties are generally Chapter Title 26 charges and there’s a Title 18 as well. But there’s a few, for example, an evade or defeat tax is any person who willfully attempts to evade or defeat tax—basically not pay the taxes. That is a maximum penalty of five years in prison and a fine of $250,000 for an individual or both.
Another charge could be a failure to collect or pay over tax. So, for example, employers are required to collect tax from employee paychecks and pay that in. If the business does not do that, then again the person responsible can be in prison for up to five years and fined up to $250,000 or $500,000 for a corporation.
Another charge is willful failure to file a return, supply information or pay tax. So while some people are not required to file a tax return, the great majority of people are required to file taxes. If you fail to file a tax return with the required information, that penalty is imprisonment of up to one year, a fine of up to $100,000 or both. So there can be some serious penalties for simply not filing a tax return.
There is then fraud and false statements—there’s various levels of fraud and false statements if you provide false information. Usually that penalty is going to be up to three years of imprisonment and a fine of up to $250,000.
An attempt to interfere with the administration of the tax code, so intimidate or impede any employee of the United States who’s trained to collect tax or collect information. That penalty is up to three years of imprisonment and a $250,000 fine.
And then there’s also the conspiracy to commit these offenses; basically the conspiracy is one or more people working together to commit one of the crimes we’ve been talking about. And that generally leads to the possible penalty of prison of up to five years and a $250,000 fine. So that’s an example of the types of crimes and penalties that are possible with tax fraud.
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