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Tax after divorce can significantly impact your financial situation. Changes in filing status, deductions, and financial obligations often catch people off guard. Overlooking important details can lead to paying more than necessary or even encountering issues with the IRS. Understanding your tax responsibilities after divorce is crucial to avoiding costly mistakes and keeping your financial plans on track.
The End of a Stressful Tax Season
Tax season can feel overwhelming, but once your income tax return is filed, relief follows. Filing an annual income tax return is a legal responsibility. Providing false information or failing to file can lead to serious consequences. Understanding the difference between tax avoidance and tax evasion helps individuals and businesses comply with tax laws.
Tax Avoidance vs. Tax Evasion
Legal Tax Avoidance
Tax avoidance involves legal strategies to reduce taxable income. Individuals and businesses use deductions, credits, and tax planning to lower tax liability while following the law.
Illegal Tax Evasion
Tax evasion occurs when someone deliberately hides income, underreports earnings, or falsifies records to avoid paying taxes. The IRS considers tax evasion a crime. Those who engage in it risk audits, penalties, and criminal charges. Common examples include failing to report cash earnings, inflating deductions, and not paying payroll taxes.
IRS Investigations Into Tax Fraud
The IRS has a dedicated team that investigates tax fraud and financial crimes. Their responsibilities include:
- Reviewing tax preparers who submit fraudulent returns on behalf of clients
- Investigating businesses that falsify payroll records or pay employees in cash
- Identifying individuals who intentionally misreport income or misuse deductions
- Detecting fraudulent tax schemes designed to avoid paying taxes
The IRS ensures that tax preparation services, such as H&R Block and TurboTax, operate within the law. Investigators also track cases of employment tax evasion, such as failing to file payroll taxes or misrepresenting business expenses.
Tax Fraud in Texas
Texas does not have a state income tax, so most tax fraud cases involve sales tax. Businesses that commit tax fraud can face state or federal charges, which may result in fines or imprisonment. Industries dealing with cigarette taxes and motor vehicle sales often receive closer scrutiny.
Penalties for Tax Fraud
Each type of tax fraud carries specific penalties. Understanding these consequences can help individuals and businesses avoid legal trouble.
Failure to Pay Taxes Collected (Tax Code 151.7032)
A person who knowingly fails to remit collected taxes to the state can face charges based on the amount owed:
- Less than $50: Class C misdemeanor
- $50 – $500: Class B misdemeanor
- $500 – $1,500: Class A misdemeanor
- $1,500 – $100,000: State jail felony
- $100,000 – $200,000: Second-degree felony
- Over $200,000: First-degree felony
False or Missing Records (Tax Code 151.7102)
Destroying, concealing, or falsifying financial records can result in a third-degree felony. This crime carries penalties of up to 10 years in prison, a $10,000 fine, or both.
Failure to Provide Records (Tax Code 151.7103)
Refusing to allow state tax authorities to inspect financial records leads to a Class C misdemeanor. Each day a person denies access after a request counts as a separate offense.
Fraudulent Use of Exemption Certificates (Tax Code 151.707)
Altering or misusing resale or exemption certificates is illegal. Obstructing access to these documents can also lead to penalties.
Federal Tax Evasion Charges
Federal tax evasion cases apply to both individuals and businesses. Charges often result from deliberate attempts to avoid paying taxes, such as failing to report income, misrepresenting deductions, or failing to submit required payments.
Attempting to Evade Taxes (Title 26 U.S. Code 7201)
Anyone who intentionally tries to avoid paying taxes may face:
- A fine of up to $100,000 for individuals or $500,000 for corporations
- Up to five years in federal prison
- Both fines and imprisonment
Failing to Collect or Pay Taxes (Title 26 U.S. Code 7202)
Employers must collect and submit payroll taxes. Willfully failing to do so can result in:
- A fine of up to $100,000 for individuals or $500,000 for corporations
- Up to five years in prison
Failing to File or Pay Taxes (Title 26 U.S. Code 7203)
Individuals required to file tax returns but who intentionally fail to do so can face:
- A fine of up to $25,000
- Up to one year in prison
Defending Against Tax Fraud Allegations
The IRS must prove that someone knowingly and deliberately avoided tax obligations. A strong defense may argue that the mistake was unintentional. Many people struggle with tax laws and may make honest errors when filing returns.
A lack of intent can serve as a valid defense. The law recognizes that tax regulations can be confusing, and a simple misunderstanding should not lead to criminal charges.
In conclusion, tax after divorce requires careful attention to ensure you meet your financial obligations while minimizing any unnecessary costs. By understanding the changes to your filing status, deductions, and other tax-related factors, you can avoid common mistakes and prevent potential issues with the IRS. Staying informed and seeking professional advice can help you navigate these changes and maintain a stable financial future post-divorce.
Need Legal Assistance? Call Us Today
The Law Office of Bryan Fagan has experienced criminal defense attorneys who understand tax fraud cases. They can assess your situation and build a defense strategy that fits your needs.
Schedule a free consultation via phone, Zoom, or in person.
Call today: 281-810-9760.
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