Hyden, Miron & Foster, PLLC Law Blog

Monday, June 12, 2017

New Study Finds that the Wealthy Are More Likely to Cheat on Their Taxes

What are the consequences of lying on your taxes?

A new paper by Annette Alstadsaeter, Niels Johannesen, and Gabriel Zucman seeks to uncover who is most likely to cheat on their taxes.  The study is based on data from three different sources, including HSBC Private Bank, a Geneva-based firm.  Based on these sources, it can be said that people with Swiss bank accounts who do not declare them are almost certainly cheating on their taxes.  The report captures large scale tax evasion and points to the fact that it is the rich who are most likely to defraud the government on their taxes.  Our Arkansas tax law attorneys discuss these new findings and the potential consequences you could face for lying on your taxes.  

The More Money You Have, the More Likely You Are to Cheat on Your Taxes

Sources examined by Alstadsaeter, Johannesen, and Zucman point to one conclusion—the richer you are, the more likely you are to hide assets or otherwise cheat on your taxes.  It is believed that the top .01 percent of the wealth distribution own roughly 50 percent of all wealth concealed off shore, and hides about 25 percent of this wealth from tax collection.  Actual rates of tax evasion are likely far higher.  

Filing False Returns is a Federal Crime

While tax evasion by the richest among us is obviously a serious crime, you may not be aware that just filing a fraudulent tax return could constitute a federal crime.  Even low dollar tax fraud is generally detected in the long run.  Filing a false return could result in fines of up to $250,000 for an individual or $500,000 for a corporation, as well as up to three years in jail.

However, prosecutors must meet a high burden of proof to convict you of tax fraud. The IRS would need to prove that you willfully made a false return or statement under the penalties of perjury.  Mere mistakes made on a filing will not generally result in serious consequences.   Consult with a tax law attorney for assistance with your tax needs so as to avoid any potential tax issues or penalties.

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