Taxpayers must know their tax responsibilities. Generally, most U.S. citizens and permanent residents who work in the United States must file a tax return if they make more than a certain amount for the year. As such, paying your taxes is not something that you can avoid. If you’re required to file a tax return but fail to do so intentionally or by mistake, you could face criminal prosecution and be subject to harsh penalties. If you have been accused or charged with tax evasion in New Jersey, it’s in your best interest to contact a proficient Bergen County Criminal Defense Attorney who can mount a strong defense on your behalf. Please continue reading to learn the potential penalties you could be subject to for tax evasion in New Jersey.
What is Considered Tax Evasion in New Jersey?
Tax evasion is the deliberate act of illegally avoiding paying taxes owed to the government. It involves intentionally misrepresenting financial information, such as income, assets, or deductions, to reduce an individual’s or corporation’s tax liabilities. Essentially, it’s the illegal attempt to pay less in taxes than you’re legally obligated to. The following includes examples of different ways of evading your tax liability:
- Underreporting your net income
- Falsely claiming dependents
- Exaggerating your tax deductions
- Transferring assets to other parties to conceal them
Tax evasion is a serious criminal offense. The Internal Revenue Service (IRS) and the New Jersey Division of Taxation don’t take tax evasion too kindly. They employ various methods to detect discrepancies in tax filings. If you’re under investigation or have been charged with tax evasion, seeking immediate legal representation is in your best interest.
What is the Difference Between Tax Fraud and Tax Evasion?
It’s important to understand that, despite the fact that the terms tax fraud and tax evasion are often used interchangeably, these are two separate criminal offenses with distinct meanings under New Jersey law.
Tax fraud encompasses any willful, deceptive, or material misrepresentation made on tax documents, like purposefully filing false returns or destroying financial records.
Tax evasion, on the other hand, is a form of tax fraud in which taxes are intentionally avoided or left unpaid.
Essentially, tax evasion is the unlawful method utilized to achieve a fraudulent reduction or elimination of tax obligations, whereas tax fraud covers a wider array of deceptive actions against tax authorities.
What Are the Potential Penalties?
As mentioned above, New Jersey imposes severe penalties for individuals and businesses guilty of tax evasion.
It’s important to understand that this is a felony offense. However, New Jersey does not use the terms “felony” or “misdemeanor” offenses, instead classifying these charges as “indictable crimes” of varying degrees. As such, if you are convicted, the penalties you face will depend heavily on the alleged “tax loss” and the specific degree of indictable offense you are charged with. These degrees and their associated sentences include:
- Lowest Level (Fourth Degree): Up to 18 months in jail plus fines.
- Mid-Level (Third Degree): 3-5 years in jail and fines of up to $15,000.
- Highest Level (Second Degree): 5-10 years in jail and fines of up to $150,000.
You should note that criminal tax cases often involve multiple offenses, often charged as one for each tax year, and related offenses like forgery, document falsification, and conspiracy. These charges can enhance the penalties imposed by the court, which also may be ordered to run consecutively.
In addition, the court may impose significant fines and require you to pay restitution for the unpaid taxes and any accrued interest. New Jersey also imposes considerable civil penalties for those convicted of tax fraud. Under N.J.S.A. 54:49-9.1, the court will impose 50% of the fraudulent portion of the tax assessment, in addition to the tax, interest, and criminal fines imposed by the court.
Proving fraud can also extend or eliminate the typical statute of limitations, exposing New Jersey taxpayers to assessment for past conduct.
A tax evasion conviction can have long-lasting consequences beyond legal penalties. A conviction for an indictable crime will remain on your criminal record for life. A criminal record can affect your ability to pursue higher education, employment opportunities, insurance rates, immigration status, right to vote, and more.
Does Federal Tax Fraud Intersect with New Jersey Tax Law?
It’s important to understand that many instances of tax fraud will incur federal scrutiny, resulting in parallel charges imposed by the Internal Revenue Code, including:
- Tax Evasion (26 U.S.C. § 7201): Up to five years of imprisonment and hefty fines of up to $100,000 for individuals.
- Failure to File/Pay (26 U.S.C. § 7203): Up to one year of imprisonment and substantial fines.
- False Statements (26 U.S.C. § 7206): Up to three years of imprisonment and steep fines.
It’s important to understand that information is often shared between state and federal authorities, meaning civil tax documents can often be used as evidence of criminal intent. As such, a Bergen County criminal defense attorney can challenge claims of fraud, assess the state’s ability to examine prior filings, and establish a coordinated defense.
Contact a Bergen County Criminal Defense Attorney Today
Given the potential long-term effects of a criminal conviction, it’s in your best interest to enlist the help of a determined Bergen County criminal defense attorney from The Law Office of Carl Spector, who will develop a robust defense strategy on your behalf. Allow our legal team to fight tirelessly to protect your rights and interests.