What is tax evasion?
The government loses hundreds of billions of dollars through tax evasion every year
Tax evasion, simply put, is when a person or company takes steps to intentionally avoid paying taxes, which is a crime that results in the government’s loss of hundreds of billions of dollars every year.
Evading tax payments can be done in a number of ways, such as by lying about how much income was incurred over year, by misrepresenting how much was deducted or by putting money in offshore accounts and therefore away from the Internal Revenue Service’s watchful eye, according to Cornell Law School’s Legal Information Institute.
“Individuals involved in illegal enterprises often engage in tax evasion because reporting their true personal incomes would serve as an admission of guilt and could result in criminal charges,” according to the Cornell's institute.
A person sitting at a table and holds a tax form (iStock)
Money laundering is an example of tax evasion. It is the act of mixing “dirty,” illegally obtained money with "clean" money as a way to “wash” the money, or make it appear legal, which also conceals its origins.
According to the Internal Revenue Code, someone convicted of felonious tax evasion faces as many as five years in prison and a fine of up to $100,000.