TAX AVOIDANCE IS LEGAL; TAX EVASION IS CRIMINAL
Any tax you pay will reduce the amount of money that you can use to support your family. If you can reduce your federal income taxes, you will have more money available for your family.
A review of the illegally released federal income tax returns of some high-income people, and those of former President Trump, shows that people with very high earnings paid little or no federal income tax.
Are they doing anything illegal? No, they are taking advantage of provisions in the Internal Revenue Code (IRC) and “legitimately” avoiding having to pay federal income tax.
In 2020, then IRS commissioner Charles Rettig said that federal income tax evasion is over $1 trillion per year—federal income/payroll taxes that are owed but not paid.
What is the difference between avoidance, which is legal, and evasion which is a criminal act?
A blog posted by the international accounting firm of Wolter Skluwer addressed this.
Here are some of the points that they made:
- "Tax avoidance" and "tax evasion" are radically different. Tax avoidance lowers your tax bill so that you reap the largest tax benefits. Tax avoidance is completely legal—and extremely wise.
- Tax evasion, on the other hand, is an attempt to reduce your tax liability by deceit or concealment. Tax evasion is a crime.
- Here are some of the most common examples of tax evasion:
- Deliberately under-reporting or omitting income.
- Keeping two sets of books or making false entries in books and records.
- Engaging in accounting irregularities, such as a business's failure to keep adequate records, or a discrepancy between amounts reported on a tax return and amounts reported on its financial statements. This generally demonstrates fraudulent intent.
- Claiming false or overstated deductions on a return.
- Claiming personal expenses as business expenses.
- Hiding or transferring assets or income.
- Engaging in a "sham transaction." You can't reduce or avoid income tax liability simply by labeling a transaction as something it is not.
If a person is convicted of criminal tax fraud, the potential penalty is directly tied to the specific criminal charge you face. For example:
- Tax evasion has a maximum sentence of five years imprisonment and a fine up to $100,000 for individuals or $500,000 for corporations.
- Willful failure to pay tax, failure to file or failure to keep sufficient records has a maximum term of imprisonment of one year, accompanied with a potential fine up to $25,000 for individuals or $100,000 for corporations.
- Fraudulent failure to file a tax return has a maximum penalty of 75% of the unpaid tax.
In 2022, there were 197,000,000 federal income tax returns filed. However, very few criminal investigations led to convictions.
According to an IRS report, in fiscal year 2022, there were 401 tax fraud offenders sentenced under the guidelines. The number of tax fraud offenders sentenced has decreased by 22.4% since fiscal year 2018.
In the same report, the IRS stated that in 2022 “…2,077 special agents spent about 70% of their time investigating tax-related crimes like tax evasion and tax fraud during FY22, while nearly 30% of their time was spent on money laundering and drug trafficking cases. Special agents identified over $31 billion from tax and financial crimes, and the agency seized assets valued at approximately $7 billion.”
The crime of tax evasion, like most other crimes, requires the government to prove the criminal intent of the accused.
Because of the complexity of the Internal Revenue Code (IRC) and the ambiguities it contains, it is often difficult to convince the Department of Justice to file a criminal tax fraud case. Thankfully, the IRS does not have its own prosecutors.
An IRS auditor may threaten that a criminal case will be started, but will use that threat as leverage to have the taxpayer pay a civil penalty to settle the case. Here are some of the civil penalties:
- If taxes are owed and you do not file your tax return by the due date, you could face a 5% monthly penalty with a maximum of 25% of the federal tax due.
- If the IRS asserts there were errors on your tax return due to negligence or a substantial understatement of the taxes owed, there can be a penalty equal to 20% of the taxes owed.
- If the IRS says that you intentionally underreported your income or claimed false deductions, there is a penalty of 75% of the income actually owed.
- If the IRS says that a taxpayer’s failure to file a tax return was fraudulent, then a penalty equal to 15% of the tax liability is assessed for every month the return was filed late.
CONCLUSION
After having read the above, does anyone who lives outside of D.C. not look in disbelief at the complicated rules and penalties associated with the income/payroll tax system?
Who among us does not consider dealing drugs to be a more serious crime than income tax evasion? Who among us does not want to direct the people now working for the Criminal Investigative division of the IRS to go to work for the Drug Enforcement Agency and pursue drug dealers and not ordinary citizens?
All of us can understand why laws are needed to protect society against drug dealers, murderers and terrorists.
None of us like laws that are not applied equally. But are they really catching income tax evaders? There were 197,000,000 income tax returns filed in 2022, and only 480 people convicted of tax fraud. Sure, many of the 2770 cases investigated by the Criminal Investigation division of the IRS resulted in the taxpayer pleading guilty without a trial.
But doesn’t it seem absurd that it is ok for billionaires to pay no federal income taxes while someone who is seeking to hide income or take improper deductions is potentially sent to prison or chased by the IRS as if they were a terrible criminal?
The simple answer--enact the FAIRtax.
The FAIRtax will be enforced by the states—not the IRS. Only businesses or people who sell new retail goods and provide retail services will have to collect the FAIRtax and remit it to the government.
Since less than 10% of the retailers account for 90% of retail purchases, there will be much less opportunity for evasion.
Today, if you pay cash to a repairman, it is the repairman’s obligation to report the income.
Under the FAIRtax, the repairman that’s providing a retail service will be required to collect the FAIRtax. If he fails to collect the FAIRtax from the customer, that transaction violates the law—simple and easy. But in that case, it’s the repairman who failed to collect the FAIRtax that’s in trouble. Not the customer who didn’t pay the tax.
Why would D.C. pass the FAIRtax and give up this almost unlimited source of donations? The only way that they will is if the rest of us demand it!
The FAIRtax transfers power from the government and bureaucrats to the people. We, not the bureaucrats and D.C., decide how much tax we pay.
Isn’t it time to end this ludicrous tax collection system and the IRS?
There is going to be a vote on the FAIRtax in the House of Representatives. McCarthy and the other elites didn’t want it, but it was forced on them.
We now have the opportunity to force all Members of the House to show where they stand. They can:
- Vote for the present income/payroll tax system or for the FAIRtax.
- Support the corrupt income tax and the IRS or eliminate it. It can’t be any simpler than that.
- Hide the true cost of their government or pass the FAIRtax and show everyone the true cost of government on each retail receipt.
- Support the largest transfer of power from government to the people, the FAIRtax, or not.
If Members think that the FAIRtax needs to be amended to address a problem, then they can propose the change. Don’t let reject the entire bill because it has a perceived “flaw” that can be addressed.
Please stand with us and demand that your representative support a much fairer, much simpler and much more efficient way to fund the government—the FAIRtax!
The FAIRtax doesn’t pick winners and losers. Because it taxes spending, not earnings, the FAIRtax lets everyone save for their retirement tax free.
The FAIRtax will allow us to TAKE BACK CONTROL.
The income/payroll tax system is broken and no longer working—we can’t repair it but we can replace it with the FAIRTAX!
Join us and TAKE BACK CONTROL OF OUR COUNTRY AND OUR LIVES—NOT WITH BULLETS BUT WITH THE ELIMINATION OF ONE OF THE BIGGEST THREATS TO OUR LIBERTY AND ECONOMIC PROSPERITY—THE INCOME/PAYROLL TAX.
We all should remember Edmund Burke’s warning that applies to our efforts to TAKE BACK CONTROL,
“Nobody made a greater mistake than he who did nothing because he could do only a little.”
We should also remember this quote from George Orwell's 1984, which, if we do nothing, may foretell your and your children's future:
“If you want a picture of the future, imagine a boot stamping on a human face—forever.”
WHAT CAN EACH OF US DO?
We can write letters and make calls to our elected representatives and attend Zoom town hall meetings demanding that if they really want to allow Americans to “TAKE BACK CONTROL”, the first step is to eliminate the income/payroll tax system and enact the FAIRTAX!
TAKE BACK CONTROL! Help us PASS THE FAIRTAX!
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