An old saying reminds us that there are only two certainties in this life: "death and taxes." Whoever coined that phrase couldn't have known how true it was, particularly regarding the latter portion.
The Internal Revenue Service recently released its annual Enforcement Report, and the numbers don't lie. In addition to the overall instances of tax fraud identified that totaled $5.7 billion, the IRS further found another $26.9 billion in financial crimes. There were over 1,200 warrants executed last year alone, in addition to 1,837 crimes that were ultimately referred for prosecution.
All of this is to say that if you've ever considered the idea of hiding income from the IRS, the numbers are very firmly against you.
The IRS has a staggering 90.6% conviction rate for these crimes. To put that into perspective, in 2018, there were almost 79.000 cases filed by the federal government for various crimes. Of that total, only 320 resulted in convictions - meaning that you're more likely to get away with a drug offense, a property offense, or even a violent crime than you are lying to the IRS.
All of this is to say that there is a lot that can go wrong if you are a tax evader and are in the process of actively running afoul of the Internal Revenue Service. This is true for a wide range of different reasons, all of which are worth exploring.
The Consequences of Being a Tax Evader: What You Need to Know
If the IRS identifies some discrepancy on the return you file, at a bare minimum, they will likely send you a notice. This is true whether or not they suspect that the issue resulted from malicious intent.
Remember that the IRS doesn't just get information about your tax returns every year from the filer. They also compare data obtained from employers, payment processors, banks, and other financial institutions. If there is anything that doesn't formally line up between those sources, you will likely get a notice in the mail with a request to provide additional documentation.
Additional Considerations About Tax Evasion
Another step that the IRS can take during these matters involves a formal audit. This is a lengthy (and sometimes costly) process that will essentially see representatives from the IRS go over your income tax returns, W-2 forms, and other financial statements with a fine-toothed comb to get to the bottom of what, if any, issues have been identified. Some estimate that the more detailed audits can last more than a year and result in late fees, penalties, and more. It's also been estimated that the average audit results in an additional $9,500 of taxes owed, which is a situation you would want to avoid if you can.
This is all before you get into the additional costs of paying for professional help to assist in your audit defense in the first place. If the IRS suspects that you knowingly lied - and that you're hiding a significant amount of money - they will come at you in full force. Defending yourself and avoiding civil penalties almost immediately becomes an uphill battle requiring additional assistance. So not only are you paying a professional to help, but you're also going to end up paying the IRS what they are owed. Instead, you could be forthcoming on your income taxes in the first place to help avoid this type of situation altogether.
In the end, trying to evade the IRS isn't worth it - both in a figurative sense and in a literal one, too. This underlines the importance of partnering with a tax professional for all your financial needs. They can help you avoid this type of scenario and (legally) minimize your income tax bill so that you can enjoy all the benefits of the United States tax code with as few potential downsides as possible.
If you have any questions you'd like to discuss with someone in more detail, please don't hesitate to contact us today.