Tax Evasion Law and Legal Definition

Tax evasion is the intentional and fraudulent underpayment or non-payment of taxes. It is paying less than the legally due tax liability by using illegal methods. The crime of tax evasion involves deliberately misrepresenting or concealing the nature of financial affairs to the tax authorities to reduce their tax liability, and may include such dishonest tax reporting tactics as underdeclaring income, profits or gains; or overstating deductions.

Recently, there has been a push to crack down on offshore account used to conceal assets. For 2000, the IRS estimates there were 505,000 taxpayers participating in some kind of offshore tax evasion scheme. Anyone found guilty of evading taxes is generally subject to criminal charges and substantial penalties.

The following is the federal law governing statutes of limitations for tax evasion:

"No person shall be prosecuted, tried, or punished for any of the various offenses arising under the internal revenue laws unless the indictment is found or the information instituted within 3 years next after the commission of the offense, except that the period of limitation shall be 6 years—

  1. for offenses involving the defrauding or attempting to defraud the United States or any agency thereof, whether by conspiracy or not, and in any manner;
  2. for the offense of willfully attempting in any manner to evade or defeat any tax or the payment thereof;
  3. for the offense of willfully aiding or assisting in, or procuring, counseling, or advising, the preparation or presentation under, or in connection with any matter arising under, the internal revenue laws, of a false or fraudulent return, affidavit, claim, or document (whether or not such falsity or fraud is with the knowledge or consent of the person authorized or required to present such return, affidavit, claim, or document);
  4. for the offense of willfully failing to pay any tax, or make any return (other than a return required under authority of part III of subchapter A of chapter 61) at the time or times required by law or regulations;
  5. for offenses described in sections 7206 (1) and 7207 (relating to false statements and fraudulent documents);
  6. for the offense described in section 7212 (a) (relating to intimidation of officers and employees of the United States);
  7. for offenses described in section 7214 (a) committed by officers and employees of the United States; and
  8. for offenses arising under section 371 of Title 18 of the United States Code, where the object of the conspiracy is to attempt in any manner to evade or defeat any tax or the payment thereof.

The time during which the person committing any of the various offenses arising under the internal revenue laws is outside the United States or is a fugitive from justice within the meaning of section 3290 of Title 18 of the United States Code, shall not be taken as any part of the time limited by law for the commencement of such proceedings. (The preceding sentence shall also be deemed an amendment to section 3748(a) of the Internal Revenue Code of 1939, and shall apply in lieu of the sentence in section 3748 (a) which relates to the time during which a person committing an offense is absent from the district wherein the same is committed, except that such amendment shall apply only if the period of limitations under section 3748 would, without the application of such amendment, expire more than 3 years after the date of enactment of this title, and except that such period shall not, with the application of this amendment, expire prior to the date which is 3 years after the date of enactment of this title.) Where a complaint is instituted before a commissioner of the United States within the period above limited, the time shall be extended until the date which is 9 months after the date of the making of the complaint before the commissioner of the United States. For the purpose of determining the periods of limitation on criminal prosecutions, the rules of section 6513 shall be applicable. "

Tax evasion is a serious crime punishable by imprisonment, fines, and the imposition of civil penalties. The following federal law governs fines imposed for tax evasion:

"Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution. "