California officials recently investigated and charged a local realtor of tax evasion. The prosecution claims the woman deposited commissions from home sales in a way designed to avoid triggering mandatory reporting requirements. This, in combination with the fact she allegedly failed to file income tax returns, led the government to pursue criminal tax evasion charges.
The allegations further include claims the accused failed to file returns from 2013 through 2017. The Internal Revenue Service (IRS) states the woman effectively hid over $1 million in income during this time period.
Evasion v. fraud: What is the difference?
Mistakes happen. Even the IRS recognizes that not every error on tax returns is fraudulent. Taxes are complicated and it is not uncommon for taxpayers to make a mistake. However, intentional attempts to avoid tax obligations can rise to the level of fraud. The IRS essentially defines tax fraud as a willful attempt to evade tax law. This can include failing to file tax returns or intentionally failing to report income.
What happened in this case?
In this case, the prosecution worked to establish the distinction between an honest mistake and an intentional attempt to avoid tax obligations. This included gathering evidence to show the accused structured her commission deposits to remain under $10,000. This allowed her to deposit these payments without triggering the bank to disclose the deposits to the IRS.
When faced with this and other evidence, the accused chose to accept a plea deal. The deal included 180 days, approximately 6 months, of prison time along with $78,000 in mandatory restitution payments to the government.