With tax season in full swing, you and thousands of other New Yorkers likely are in the throes of preparing your tax returns. Or maybe you chose to hire an accountant or tax preparation service to figure out your taxes this year. Either way, you probably find the whole tax filing process to be more than a little stressful. What if you make a mistake? What if your preparer makes a mistake? Will the IRS come after you for tax evasion?
The answers to those three questions are no. The IRS does not criminally prosecute people for making inadvertent mistakes on their tax returns. Mistakes per se do not rise to the level of tax evasion. To criminally prosecute you, IRS agents must believe that you deliberately did something, such as one or the more of the following:
- Deliberately filed a false tax return
- Deliberately failed to file a tax return at all
- Deliberately overstated the amount of your deductions
- Deliberately concealed or failed to report the amount of income you received
- Deliberately put your assets into someone else’s name and/or control so you would not have to reveal them as yours
- Deliberately destroyed or concealed your underlying financial records
Civil versus criminal
If the IRS believes you deliberately evaded paying your taxes, it can come after you either criminally or civilly. The difference between the two has to do with the burden of proof the IRS must meet in order to prevail. In a criminal prosecution, the IRS must prove its case beyond a reasonable doubt. In a civil case, however, it must only prove its case by a preponderance of the evidence. In other words, it must only prove a 51 percent likelihood of your wrongdoing.
The other difference between coming after you criminally or civilly has to do with the penalties you will face if the IRS prevails against you. You only face a prison sentence if convicted of criminal tax evasion. On the other hand, you face substantial interest, fines and penalties for both a criminal conviction and if you lose your civil case.
As you might suppose, if the IRS convicts you of criminal tax evasion, your penalties may be quite severe. For instance, failing to file your tax return could land you in federal prison for up to 12 months as well as having to pay a $100,000 fine. The penalty applies to each tax year during which you committed this type of tax evasion.
Conviction of filing a fraudulent tax return could get you up to three years in federal prison and a fine of up to $100,000. The fine for conviction of concealing or misrepresenting your income also tops out at $100,000, but your possible prison term could be as long as five years.