The U.S. Tax Code presents specific details about what taxes people and companies pay, along with rules that might allow a person or enterprise to reduce tax burdens. A North Carolina resident may receive a notice from tax authorities questioning legal deductions. A tax audit might cause undue stress, and the situation could worsen when the taxpayer faces a criminal investigation. Those worried about potential audits or investigations may need to review the differences between tax avoidance and tax evasion.
Tax avoidance might sound somewhat negative, but the term refers to honest and legal steps to cut down on tax obligations. Persons who itemize legitimate business losses and expenditures or take special credits, such as a self-employed healthcare deduction, take advantage of valid tax-reduction statutes. Someone who donates money to a viable charity might also reduce their obligations.
Taking false deductions or failing to disclose income would not likely fall under any legitimate tax avoidance steps. Persons who file false returns could face claims of tax evasion. The same could be true when someone does not file a tax return or pay the tax owed. Attempts to hide income may also lead to tax evasion claims and possible criminal charges.
A criminal defense strategy might indicate that the accused’s supposed tax evasion derived from negligence and not deliberate intent. That is, the taxpayer may never have intended to defraud the government. Instead, errors and mistakes led to omissions on the return. The taxpayer could face civil penalties for such issues, but there might be reasonable doubt regarding criminal behavior.
Other factors might come into play when addressing a criminal complaint. Questions about the statute of limitations may arise. Concerns about investigation improprieties could come into focus, too.