In Massachusetts, tax evasion is a serious crime that can result in serious criminal and financial consequences. Tax evasion crimes in the Commonwealth usually relate to crimes that are conducted when the return is filed, and crimes related to not filing the return at all.
In this state and across the state, common tax evasion and tax fraud crimes include:
- Failure to file a state or federal tax return
- Failure to pay taxes owed
- Filing a falsified state or federal tax return
- Tax money laundering
Tax evasion and tax fraud is addressed in Massachusetts General Laws Part 1 Title IX Chapter 62C Section 73.
Massachusetts Laws and Penalties
In Massachusetts, it is a felony to willfully evade payment of state or federal taxes. Also, tax fraud in Massachusetts can result in a fine of $25,000 and jail sentence of up to one year.
At the federal level, below are some of the common penalties for tax evasion or tax fraud:
- Attempting to defeat or evade paying taxes: You are guilty of a felony and can be put in federal prison for up to five years, receive a fine of up to $250,000 for an individual or $500,000 for a corporation, or both, plus the cost of prosecution.
- Fraud and false statements: You are guilty of a felony and can be put in federal prison for up to three years, receive a fine of up to $250,000 for an individual and $500,000 for a corporation, or both, plus the cost of prosecution.
- Willful failure to file a tax return or pay tax at the time required by law: This includes failure to pay proper estimated taxes, failure to make a tax return, keep records or supply information. Taxpayer is guilty of a misdemeanor and can be sentenced to a year in prison, a fine of up to $100,000 for individuals and $200,000 for corporations, or both, plus the cost of prosecution.
You also can have a federal tax lien placed on your property, such as your home or car. The IRS or state government also can place levies on your bank account, retirement account or Social Security payments to satisfy your tax debt.
Determining Negligence or Tax Evasion
The IRS and the Massachusetts state government understand the federal and state tax code are complex and rules are very difficult for most laymen to figure out. When there are careless errors made, and if signs of fraud are not seen, the IRS usually assumes that the mistakes were honest and not wilful tax evasion. In this situation, the tax auditor usually will fine the taxpayer 20% of whatever was underpaid.
The IRS usually can determine if an error is negligence or is willful evasion of state and federal tax laws. Common types of suspicious tax related activity include:
- Overstating deductions and exemptions
- Falsifying documents
- Concealing or transferring income
- Keeping two sets of accounting books
- Falsifying personal expenses as business expenses
- Using a fake SS number
- Claiming exemptions for a dependent who does not exist
- Underreporting income
Massachusetts Defenses for Tax Evasion
One of the major defenses for tax evasion at the state and federal levels is showing there is insufficient evidence that the person evaded paying taxes with purpose. The IRS will try to prove you were aware that you were doing wrong and had a willful intention to defraud the US government or state government. Simple mistakes on tax forms or carelessness do not lead to being convicted for tax evasion.
Another common defense is to prove the taxpay honestly thought they had not committed the crime. To use this defense, the taxpayer needs to show they were relying on incorrect information.
Massachusetts Statute of Limitations
The statute of limitations for tax errors in Massachusetts is three years from the date the return was filed. But there is no statute of limitations for filing a false return.
The statute of limitations for the IRS to assess taxes on you generally expires three years from the due date of the return, or the date on which it was filed, whichever is later. Also, the IRS statute of limitations can be extended when there is a major omission of 25% of gross income on the return or greater. In this case, the statute of limitations is six years.
However, in a case where you filed a false or fraudulent tax return, made an effort to evade taxes or did not file a return, there is no statute of limitation.
Massachusetts Tax Evasion Cases
- MA Restaurateur Sentenced to 2 Years in Prison for Tax Fraud — A restaurant and temp agency owner named Souleang Kane, 48, pleaded guilty in December 2017 to almost two dozen counts of various financial crimes, including tax fraud, tax evasion, five counts of mail fraud and 18 counts of willful failure to collect and pay tax. Kane was sentenced in Boston federal court to two years in federal prison. Kate was the owner of 5 Star Restaurant in Providence as well as several temporary employment agencies. From 2010 to 2015, she failed to report more than $4 million in employee wages to the IRS.
- Former National Fish and Seafood President Sentenced for Tax Fraud — Jack Ventola will spend two years in federal prison for tax fraud and tax evasion. He was the president of National Fish and Seafood in Massachusetts, and has been also given a $75,000 fine and a requirement to pay restitution of $1 million. The accountant for the organization has also been charged with tax and wire fraud charges.
- Boston Restaurant Owner Faces Fraud Charges — The former owner and manager of two restaurants in Boston and Chelsea has been charged with six counts of failure to collect and pay taxes, one count of making false statements to a naturalization officer, and one count of procurement of naturalization contrary to law. Burhan Ud Din, 49, was initially indicted for tax fraud in August 2017 and was also charged more recently on the naturalization allegations.