Tax Evasion is using illegal means to avoid paying taxes. Typically, tax evasion schemes involve an individual or corporation misrepresenting their income to the Internal Revenue Service(IRS). Misrepresentation may take the form either of underreporting income, inflating deductions, or hiding money and its interest altogether in offshore accounts.

There are two forms of tax evasion: Evasion of Liability and Evasion of Collection. 

Evasion of a tax liability is where the taxpayer engages in an affirmative act for the purpose of attempting to evade or defeat the assessment of a tax, such as filing a false tax return. Here the liability is improperly understated.

Evasion of collection is where a taxpayer’s liability is correct, but the taxpayer takes affirmative steps to frustrate collection of the tax, such as filing false Collection Information Statements, managing their affairs in cash so that the government cannot levy bank accounts and collect, and hiding assets in other people’s names and other entities. Interestingly its the “Evasion of Collection” crime that is most common, probably because of the government focus on Structuring. Structuring is one of those crimes that many people commit without even realizing it’s a crime.

For example, financial institutions are required to file a Currency Transaction Report (“CTR”) whenever its receives more than $10,000 in cash or cash equivalents. Structuring is the crime committed when a taxpayer structures his or her deposits in a way to avoid having the financial institution file the CTR. When taxpayers begin trying to dodge the IRS collection efforts, often they commit the crime of structuring, which is what the Department of Justice will use as its “affirmative” act to prove the Evasion of Collection charge.

It is critical that taxpayers and their practitioners understand what Structuring is and that it is not only a crime itself but can be used by the government to bolster its tax evasion case. Moreover, by merely playing games with the IRS Collection Division the taxpayer is arguably committing the crime of Tax Evasion.

About the Author:

Joe Alabi, EA,MAcct,CTRC resides in Maple Grove, Minnesota.  The primary focus of his tax practice is  tax representation for individuals who need tax help with the IRS or the Minnesota Department of Revenue. He regularly assists clients with issues such as unfiled tax returns, back taxes, wage garnishments, bank levies, Sales tax, payroll tax issues, installment agreements, and the filing of an Offer in Compromise to settle tax debts.  Have questions? Joe can be reached directly at (612) 516 5878 or through this link.