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Harris County Tax Fraud: What Penalties Am I Facing?

Posted on March 26, 2014 by Mintzer Law

Tax evasion is a crime under federal law. The penalties for intentionally filing a tax return that a person knows to contain false information can result in sizable monetary penalties, criminal prosecution and the potential for imprisonment if convicted. The Criminal Investigation Division of the Internal Revenue Service has jurisdiction to investigate and refer for prosecution any taxpayer who engages in criminal activity with regard to the filing of a tax return or the payment of taxes.

Forms of Tax Evasion

Trying to keep one’s tax obligation as low as possible through deductions and exemptions is not illegal and usually will not draw the attention of criminal investigators. Tax evasion is when a person uses illegal methods to avoid the payment of taxes. Examples of conduct that could be interpreted as tax evasion include:

  • Failing to report the receipt of cash as income
  • Moving money into offshore accounts to avoid discovery
  • Inflating the amount of deductions
  • Filing a false tax return
  • Failing to report income from all sources
  • Under reporting income
  • Including personal expenses on a business tax return
  • Paying employees in cash to avoid employment withholding taxes

Investigation and Prosecution

If the Internal Revenue Service suspects that a taxpayer has engaged in criminal activity, it will usually have an IRS agent contact the person, but it could also refer the matter directly to the Criminal Investigation Division for action. In either case, the IRS can impose penalties and interest on the amount that the agency believes is owed by the taxpayer as a result of the tax evasion.

Agents from the Criminal Investigation Division of the IRS have authority to contact anyone with information about the suspected wrongful conduct including:

  • The taxpayer
  • The taxpayer’s spouse and family
  • Neighbors of the taxpayer
  • Employers and co-workers
  • Any bank or financial institution having information about the taxpayer’s finances

By contacting these people and entities, the agents are looking for evidence to prove that the taxpayer knowingly engaged in conduct to evade the payment of taxes. This could include evidence showing that the taxpayer misrepresented or concealed sources of income. Collected evidence is eventually turned over to federal prosecutors who can file criminal charges against the taxpayer.

Penalties for Tax Evasion

Tax evasion is a felony for which a taxpayer could receive a prison sentence up to five years and fines up to $250,000 for individuals and $500,000 for corporations. If a taxpayer files a false return in addition to evading taxes, prosecutors can file additional felony charges that are punishable by fines up to $250,000 for individuals and $500,000 for corporations. Prison sentences can be up to three years.

Besides the fines and prison sentences that courts can impose, a convicted taxpayer will also be responsible for payment of the taxes, penalties, interest and court fees. The best way to avoid these penalties is hire an experienced criminal defense attorney to handle your case. Give Rand Mintzer a call at 713-862-8880.