Last April, a British lawyer was found guilty of a massive tax fraud scheme. Michael Little, who was licensed to practice law in New York, was accused of helping the family of a U.S. investor conceal millions of dollars from the IRS by depositing it in Swiss bank accounts. He now faces up to five years in prison.

Tax fraud is often dismissed as a harmless “catch me if you can” offense. Ask anyone and they will likely say that “everyone” cheats on their taxes (although they will claim to be one of the few who doesn’t.)

It’s true that failing to file your yearly income tax return is only a misdemeanor, but when you repeatedly go without filing or act in ways that suggest a determination to avoid paying taxes, the IRS and federal prosecutors come down hard.

What is tax evasion?

Tax evasion in New York refers to the deliberate effort to avoid paying tax. Examples of evasive behavior include:

•     Hiding or failing to report income
•     Claiming false deductions and expenses
•     Misrepresenting how much you make
•     Deliberately failing to file taxes

U.S. tax rules are highly complex, and have an equally broad array of offenses connected to the Internal Revenue Code. To make matters even more complicated, there are both federal and state tax offenses that can apply to a particular situation.

Federal Tax Offenses

There are presently 18 federal tax offenses. They are divided into two types of violations: evading tax payments and evading tax assessments. Crimes and their penalties include:

• Intentional failure to pay taxes that you rightfully owe can result in a five-year prison sentence and a fine of up to $100,000.
• Intentional failure to collect taxes (e.g. from employees) and pay them can send you to prison for up to five years and force you to pay a $10,000 fine.
• Intentional failure to file a tax return, keep necessary records, or provide information to the IRS on request is a misdemeanor punishable by up to a year in jail and a $25,000 fine.
• Filing a fraudulent return or counseling someone else on how to do so may result in three years of imprisonment and a $100,000 fine.

If convicted of a federal tax crime, then you may also be ordered to pay the prosecution’s costs.

New York Tax Offenses

New York State collects a wide range of taxes, including sales tax, corporate taxes, cigarette taxes, and employment taxes. Like the federal government, the state recognizes different categories of tax fraud, including:

• Criminal tax fraud in the first degree, which is a Class B felony. It applies when you fraudulently deprive the state of at least one million dollars.
• Criminal tax fraud in the second degree, a Class C felony applies to the intentional withholding of $50,000 to just under one million dollars.
• Criminal tax fraud in the third degree, a Class D felony involving amounts between $10,000 and $50,000.
• Criminal tax fraud in the fourth degree, a Class E felony involving amounts between $3,000 and $10,000.
• Criminal tax fraud in the fifth degree, a Class A misdemeanor that applies when you deprive the state of less than $3,000 over a period of one year.

Any time the state or federal government accuses you of a tax crime, you stand to lose a lot: your money, your freedom, and even your future. A New York criminal defense attorney with experience in handling white-collar offenses can advise you on the best way of dealing with such charges and protect your rights so that you achieve the best outcome for your case. Julie Rendelman is a criminal defense attorney with an office in Midtown Manhattan. She has more than twenty years of legal experience and her personalized approach has won her words of praise from both her peers and former clients. If you were accused of a white collar crime, then set up a free consultation with Ms. Rendelman by calling 212-951-1232.