Despite numerous murders, assaults, and illegal businesses under his belt, the thing that took down infamous gangster Al Capone was none of these crimes…but instead tax evasion. The seriousness of this crime is massive, but the truth is not a lot of people understand the inner mechanics behind tax evasion. 

So what exactly is tax evasion, and how do people commit it? What’s more, can you commit tax fraud on accident?

Well, we’re glad you asked. It’s time to unveil our list of the 3 main types of tax evasion! 

But enough preamble, right? Let’s jump head-on into this thing!

1. Neglecting Payments on Purpose

One of the main ways that people commit tax evasion is by not filing their taxes and refusing to comply when asked to pay them. This also includes leaving info off of your tax returns on purpose. For example, if you worked a side job that paid you in cash without financial statements, you are still responsible to report those earnings 

Establishing intent is critical in a tax evasion case, as tax evasion committed on accident is not a criminal offense. In some cases, the government can even use outside documents (like your W-2 from work) to determine your taxes.

That said, neglecting to pay your taxes on time on accident can come with nasty fees even if it doesn’t end in prison time. If things progress to an investigation regardless of your innocence, you’ll want to hire a tax attorney to help you through the legal process. 

Tax Avoidance vs. Tax Evasion

It’s also important to note that the terms tax avoidance and tax evasion are not synonyms. Tax avoidance refers to using legal methods to reduce the amount of taxes you owe to the federal government. This happens through charitable donations, using pertinent business expenses as a write-off if you’re an independent contractor and more. 

2. Using Borders to Skirt Tax Laws

Another way criminals work to commit tax fraud is by exploiting the borders of states or other nations to dance around the law. For example, hiding your money in a bank outside the U.S and not reporting it to the federal government is a crime. Businesses can also avoid border transfer taxes by smuggling products across state borderlines.

3. Providing Fraudulent Information

Finally, some people opt to cheat the system by forging documents to claim they make less than they do or are exempt from paying taxes. This can take the form of keeping multiple sets of financial books, falsifying your tax returns or invoice, and more. 

Destroying any evidence of your failure to pay or of how much you really owe is also illegal, as is bribing federal, state, or local officials to circumvent paying taxes.

Stay One Step Ahead of Tax Evasion

With a handle on the top 3 main types of tax evasion, you’re all set to file your taxes without the worry of entering the wrong side of the law! For more advice on navigating the complex world of finances and the laws behind it, drop by again and read the other articles on our website!