Essential Elements of Tax Evasion

• Tax evasion should not be confused with tax avoidance, which is a lawful process of minimizing one's tax burden by taking advantage of all legal means. According to the decision handed down by the United States Supreme Court in Sansone v. United States, 380 U.S. 343, 351 (1965), tax evasion has three elements that must be present before prosecution takes place: tax deficiency, willful evasion or attempt and an affirmative act that demonstrates the evasion or attempted evasion of tax liability. All three elements must be present for the charge of tax evasion to apply.
  
  

Attempt to Evade Taxes

• An attempt to evade taxes is a felony under federal tax law. Upon conviction, an individual receives a penalty of not more than $250,000, a five-year prison sentence or both. A taxpayer filing on behalf of a corporation may receive a fine of not more than $500,000, a five-year prison term or both.
  
  

Willful Failure to Collect or Pay Taxes

• Willful failure to collect or pay taxes is also a felony under federal tax law. Upon conviction, an individual may receive a fine of not more than $250,000, a five-year prison term or both. A taxpayer filing on behalf of a corporation may also receive a five-year prison term, however, the fine for corporations is a maximum of $500,000 dollars.
  
  

Willful Failure to File, Supply Information or Pay Taxes

• Willful failure to file, supply information or pay taxes is considered a misdemeanor under federal tax law. Nonetheless, upon conviction, an individual may receive a one-year prison sentence or be required to pay a fine of up to $100,000 or both. Convicted taxpayers filing on behalf of a corporation may also receive a one-year prison sentence or a fine of up to $200,000 or both.
  
  

Fraud and False Statements

• Fraud and false statements included on tax returns are a felony under federal tax law, whether a taxpayer prepares her own return or a professional prepares the return for her. The penalties are the same for taxpayers or for professional tax preparers. Upon conviction, an individual taxpayer or a tax preparer acting on behalf of an individual taxpayer may receive a prison sentence of three years or be required to pay a fine of $250,000 or both. A corporation or a tax preparer acting on behalf of a corporation may receive a three-year prison sentence, a fine of up to $500,000 or both.