By Carey Lampel, LLM
EBS Consulting, Inc
It is perfectly legal to run your business in such a way that you reduce your tax liability. Of 
course, you’re entirely within your rights to claim every lawful deduction or credit and there are tax consultants who will advise you the optimum method of going about this. But, if you evade paying your due taxes by fraudulent means, that’s a very serious crime. A lot of people seem to confuse the distinction between tax evasion and tax avoidance.
Failing to report cash income, claiming false deductions and inflating the value of donations to charity are the most common form of tax fraud. This is known as underreporting income. You may not fall foul of the law if you can show that you made an honest mistake but, if a revenue agent audits your books and discovers fake documentation or reveals you have deliberately entered false information on your tax return, you’re going to be in big trouble.
How much trouble? We’re talking about a penalty and a fine commensurate with the severity of the fraud. The fine will be heavy if your documentation actually turns out to be faked. And, if there is evidence of a serious fraud involving a large amount of money, your case may even be referred to the criminal investigation unit.
Governments take a dim view of people who attempt to defraud them out large amounts of money by filing a false return or no return at all. Pending a criminal investigation by the Justice Department, you may be arrested and, if found guilty, sentenced up to five years in prison.
The sentence for failing to file a return carries fines of up to $25,000 for each year you did not file. Sentences for tax evasion and filling a false return can carry fines of up to $100,000.
The IRS will demand immediate payment if you owe additional taxes, penalties or fines. If you cannot pay, the IRS may allow you to pay installments. But you will be charged interest on the unpaid balance. If you cannot negotiate a plan, the IRS has the power to file a lien or legal claim on your property.
The IRS can levy your income and financial accounts and any future refunds will be applied to your account until the balance is paid in full.
