From news articles to casual conversations, people often use the terms “tax fraud” and “tax evasion” as if these two things are the same. But, in the eyes of the law, these concepts are not synonyms. They're different concepts with distinct requirements and consequences.

Tax Fraud vs. Tax Evasion

As we previously discussed, tax fraud is an intentional crime. Someone guilty of tax fraud purposefully misled the IRS to avoid paying taxes. For example, they may have falsified documents. They claimed deductions weren't entitled to. They failed to keep the required documentation that could have revealed the issue. And tax fraud can result in a 75% penalty and possible criminal charges.

When it comes to tax evasion, it, too, is an intentional crime perpetrated to reduce someone's tax obligation. Tax evasion occurs when a taxpayer makes 

• A willful attempt to evade or defeat tax assessment or
• A willful attempt to evade or defeat the tax payment

Thus tax evasion must be intentional, but it doesn't require fraud or deceit. It could involve fraud (e.g., faking records to reduce one's liability), but it isn't always required. What is required is the willfulness of the tax evader, an action taken to avoid the payment, and an amount owed (or assessed).

So, for example, someone who used a false Social Security number to pay taxes on their income could be charged with tax fraud, but they are unlikely to face a tax evasion charge. Meanwhile, someone who submitted an accurate return but refused to pay the amount might be charged with tax evasion but not tax fraud. And if someone maintained two sets of accounting records and submitted a return based on the false records, they might be charged with both tax fraud and tax evasion.                                                   

Penalties for tax evasion are also severe: Tax evasion is a felony, with fines of up to $100,000 (or $500,000 for a corporation), imprisonment of up to five years, and reimbursement for the cost of prosecution.

If you believe that you could face charges of tax fraud, tax evasion, or any other tax-related crime, don't wait. Hire an attorney who specializes in tax law as soon as possible. A tax attorney can review your case, determine your potential liability, and come up with a legal strategy for you.