You’ve let some deadlines go. The amount of taxes that you owe has kept increasing and increasing – until the IRS may be looking to collect tens of thousands of back taxes from you.
Yes, that’s a lot of money. And there will be hefty interest and possibly stiff penalties to pay before you get it behind you. But just because the number is large, does that mean that there is a possibility you’ll face to face a criminal charge for tax evasion or fraud?
Not necessarily. It generally isn’t the dollar amount that is crucial in determining whether enhanced monetary penalties or criminal prosecution are in order.
The concept of ‘willfulness’
Instead, the question turns on the concept of “willfulness.” Penalties can get enhanced, and the IRS could choose to pursue a criminal investigation, if the agency believes your conduct was “willful” in trying to evade taxes.
This doesn’t mean, however, that unawareness of tax-filing requirements allows you to claim that violations weren’t willful. As the old saying goes, ignorance of the law is not an excuse.
Failing to inform yourself of legal requirements, coupled with actions that may look like concealment, could be interpreted by the IRS as willfulness. Actions that could look like concealment include things like using trusts or shell companies to disguise ownership of accounts or engaging in accounting irregularities.
Offshore accounts and the OVDP
One example of the distinction between willful and non-willful tax violations can be found in the Offshore Voluntary Disclosure Program (OVDP) for offshore accounts.
In 2014, the IRS introduced a streamlined procedure by which taxpayers can certify that their lack of compliance with foreign-asset reporting obligations was not willful.
Under the Streamlined disclosure program, tax penalties are generally not as heavy as they are in the OVDP program as a whole. Indeed, there is even evidence that some taxpayers have chosen to withdraw from the OVDP in order to avoid those stiff penalties – even though the OVDP offers protections against the possibility of criminal prosecution for taxpayers who meet certain criteria.
If you have been accused of willful tax evasion, it is best to speak with an attorney who is experienced in tax-related issues.