The Internal Revenue Service (IRS), along with state and local governments, takes a tough stance against people or corporations that do not pay their taxes or submit false tax forms. In some instances, convictions for tax evasion can result in significant fines or possible prison time.
At Mazzoni Karam Petorak & Valvano, we understand the seriousness of such charges. That’s why we want to meet with you and discuss the details of your case. Our experienced Scranton tax evasion attorneys have years of experience handling white collar criminal investigations involving various tax-related criminal charges.
What is Tax Evasion?
Tax evasion cases generally fall into two major categories. The most common forms generally include:
- Failure to pay taxes – Whether intentionally or by accident, some people or corporations do not pay their local, state, or federal taxes, including estimated taxes. Stories abound about people or corporations that do not pay their taxes for years.
- Tax fraud – In such instances, a person or corporation submits tax forms with false information intended to deceive the government. Forms of tax fraud often include underreporting income, falsifying deductions, and concealment of assets.
Other forms of tax evasion exist. They include:
- Underreporting income
- Overestimating expenses/deductions
- Failing to collect employment taxes
- Making false statements to investigators
- Violating employer withholding requirements
- Not filing a yearly tax return
If you are dealing with different types of tax problems or are being audited by the IRS, you might need a tax fraud attorney to handle your complicated case.
Pennsylvania Tax Evasion Penalties
The penalties for Pennsylvania tax evasion and tax fraud vary widely. The biggest difference between a mild or harsh penalty often depends largely on whether someone intentionally tried to avoid paying taxes.
If someone made a careless mistake and did not pay certain taxes, the IRS might forgive such a mistake or perhaps assess the person or corporation filing corrected tax forms a 20 percent penalty.
If the government determines that a person or corporation knowingly submitted false tax forms in an attempt to avoid paying taxes, the penalty for tax fraud can climb as high as a 75 percent penalty.
In cases where the defendant is found guilty of a misdemeanor, they may face a fine of $1,000 plus the costs of prosecution and be imprisoned for up to three years.
Depending on the amount of money involved, people convicted of tax fraud might be sentenced to prison time. This is especially true if the government determines that a person convicted of tax fraud made money through illegal activities such as illegal drug distribution, organized crime, or other RICO or racketeering violations.
Depending on the intent of the tax evasion–whether you purposely or unintentionally committed tax fraud–will ultimately determine what defenses are available to you.
In Pennsylvania, the most common defenses are:
- Lack of Intent: If you have made a mistake while filing taxes or your company has made a filing error, you may not have intended to commit tax evasion.
- Entrapment: If you believe you have been coerced by the government to commit tax evasion when you would not have otherwise, this is a possible defense. However, just the opportunity to commit tax evasion is not evidence that entrapment occurred.
- Insufficient Evidence: If the prosecution cannot prove you willfully did not pay taxes, this can be proof of insufficient evidence. In addition, if there is a debate that the case is an issue of avoidance vs. evasion, it can lead to insufficient evidence to prove your fault.
- Insanity: Though a tough sell for tax evasion cases, you may be able to claim that you were insane at the time of the offense or during the trial.
Updates to Tax Legislation in Pennsylvania
In 2019, Pennsylvania Governor Tom Wolf signed in law an act that institutes a three-year limitation period for criminal tax prosecutions. Under the rule, the Commonwealth of Pennsylvania may only prosecute, attempt to prosecute, or punish a person for an offense under a Pennsylvania tax statute if instituted within three years of the commission of the offense.
Exceptions to the three-year limitation include:
- Fraud or breach of fiduciary obligation
- Willful attempt to evade or defeat a tax or a payment of a tax
As of January 1, 2021, the act mandates a 10-year lookback period during which the state can collect assessed taxes, except inheritance taxes. Exceptions to the look-back period similar to the three-year limitations are:
- Those who are an agent to a trust who willfully failed, grossly neglected to submit a tax return
- Those who filed a false and fraudulent tax return or report
- Those who willfully failed to file a tax return or report as required by law
- Those who attempt to commit tax evasion
- Those who have been criminally charged and convicted where a tax liability remains unpaid
Why Do You Need a Tax Evasion Attorney?
Our Scranton tax evasion attorneys at Mazzoni Karam Petorak & Valvano have extensive experience handling complicated cases in Scranton and throughout Northeastern Pennsylvania. Along with tax law, our attorneys are well versed in real estate law and wills, trusts, and estates.
Even if you violated state or federal tax laws, you still have rights and protections that must be protected throughout any investigation into your tax returns. Contact us for a free consultation. Call (570) 348-0776.