Tax Evasion

Types of Tax Evasion Cases

For every form of taxation, there is a method for tax evasion. The tax evasion cases that make the papers typically involve wealthy individuals who have attempted to shirk income taxes. However, tax evasion also occurs in the transfer of money through trusts as well as in commerce. The latter includes crooked dealings in general business practices, employment, and retail sales.

Avoiding Payment on Income Taxes

Individuals evade income taxes in several ways. Some fail to file a return or make false declarations on a return, such as exaggerated or fake deductions and unreported income. People have been known to claim a second address as their filing address to avoid paying a certain state’s taxes. Finally, many corporate executives have been known to write off personal expenditures as business expenses in order to avoid paying personal income tax on them.

Trust Schemes

Abusive trust schemes contend to transfer money into another’s possession, but do not actually do it. Elaborate ladder systems are created in which one transfer after another occurs without the money ever leaving the control of its owner. The ‘transfers’ negate the taxes on the individual’s income.

Business Tax Evasion

Business tax evasion usually involves the misstatement of income or expenses. This is accomplished in several different fashions:

• A business expense that lends itself particularly well to tax evasion schemes is payroll. Employers have been known to keep tax withholdings for themselves, pay employees in cash (“under the table”), or file false payroll tax returns. Sometimes, employment is leased out to a second company, and this transaction is used to hide income or exaggerate expenses.
• Retail stores also find ways to avoid sales tax. They may collect sales tax reimbursement from customers but fail to report it. They may also make transactions for cash and neglect to report the sales. Stores have even been known to arrange with customers to fake an out-of-state sale so that the customer gets a better price and neither side has to pay sales tax.
• Certain goods have special taxes reserved for their importation into and sale within the U.S. or a particular state. These include petroleum products and tobacco products, among others. Buyers and sellers of these goods have been known to attempt to escape taxation by purchasing illegally procured versions of these products (e.g. buying cigarettes without tax stamps or unregulated gasoline).

Contact Impact Law

If you would like to learn more about tax evasion or another type of financial crime, please contact Impact Law to arrange a consultation with an attorney in your area.