Tax evasion is an illegal activity where individuals or entities deliberately avoid paying their taxes. This typically involves misrepresenting income to tax authorities by underreporting earnings, inflating deductions, or concealing money in secret locations like offshore accounts. Tax evasion is often associated with the informal economy, where income goes unreported. The IRS considers it a serious federal offense, distinct from tax avoidance, which is the legal use of tax laws to minimize one's tax burden.
In the United States, tax evasion is a felony offense that can lead to severe penalties. Individuals convicted of tax evasion may face substantial fines, potentially up to $100,000 for individuals and $500,000 for corporations, and imprisonment for up to five years. The prosecution must prove that the defendant willfully attempted to evade tax, committed an affirmative act to evade tax, and had the specific intent to evade a known legal duty to pay. Some notorious tax evasion cases involve figures like Al Capone, who was famously convicted of tax evasion and sentenced to 11 years in prison, and Walter Anderson, who was convicted of the largest tax evasion case in U.S. history.
