What You Need to Know About the Statute of Limitations for Tax Evasion
While taxes are an annual duty that every law-abiding American must do, they can be extremely confusing, frustrating, and exhausting. This may lead to mistakes, making the line between outright fraud and simple miscalculations a fine one to walk. Here is everything you need to know about the statute of limitations for tax evasion.
The Statute of Limitations for Tax Evasion
A statute of limitations is a term used in civil law systems noting the maximum amount of time a prosecutor or plaintiff must file a claim and begin legal proceedings after an event. For cases regarding tax evasion and tax fraud, the Internal Revenue Service (IRS) is generally given 3 years to audit one’s tax returns. If the IRS discovers that over 25% of one’s income was concealed, then the time they are allotted for the statute of limitations doubles to 6 years.
However, it must be noted that this is a general rule of thumb, and may not always be followed. The time given to the IRS to file a claim may be extended for a multitude of reasons.
Related: IRS Whistleblower Laws and Tax Fraud Reporting
Why the Statute of Limitations Might be Extended
There are several reasons why the statute of limitations for a tax evasion case might be extended. For example, if someone guilty of tax evasion has left the United States or has become a fugitive, then the statute of limitations could be paused until they are found or have returned to the United States.
Another reason why the statute of limitations may be considered pliable is that it is unclear when the IRS may choose to mark the beginning period of the statute. When the 6-year criminal fraud statute begins and ends is a point heavily argued in court, depending on the circumstances. For example, if the offense has continued for years, the IRS may choose to count it as a single charge, thereby denoting the most recent instance as the beginning of the 6-year period.
Further, though the IRS is limited in how far it can go back when filing criminal court charges, there is no statute of limitations for civil tax fraud. While the IRS generally stays within the 6-year period, this is nonetheless a useful fact to consider.
What Counts as Civil or Criminal Tax Crime?
Because there is no statute of limitations for civil tax fraud, it may be important to distinguish which cases this might apply to. Tax evasion is considered a criminal offense, and is therefore subjected to the statute of limitations. On the other hand, tax fraud may be either criminal or civil, depending on the extent of the case. Further, tax fraud is considered a federal offense.
There are three main situations in which the IRS civil tax ‘forever statute’ may apply that one should be aware of. These three are false returns with the intent to evade taxes, any willful attempt to evade taxes, and any failure to file a return.
Related: How to Qualify for the Child Care Tax Credit in 2021
Avoidance vs. Evasion
Unlike tax evasion, avoidance is not technically considered a criminal offense. Tax avoidance refers to any lawful attempts one makes to reduce, avoid, or minimize taxes. This does not include any malicious attempts to conceal evidence, misreport data, or use any illegal means to reduce taxes. Evasion includes affirmative action to evade the payment of a tax, such as deception or concealment.
What Happens When Caught for Tax Evasion
While the IRS cannot send people to jail directly, they can file for a criminal investigation. This investigation can be referred to the Department of Justice and pursued in court. This may lead to criminal prosecution and jail time if one is convicted.
The statute of limitations for tax evasion and tax fraud differ. While tax evasion cases are criminal and are usually given 3 to 6 years depending on the severity of the case, tax fraud is a civil case and has an unlimited statute. If you are facing tax evasion and need a lawyer, get your free consultation with a Her Lawyer attorney today.
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If you or a loved one would like to learn more about the Tax Evasion Statute of Limitations, get your free consultation with one of our most qualified attorneys today!