Tax evasion in Massachusetts involves the illegal act of intentionally avoiding the payment of taxes that are lawfully owed to the state or federal government. This can include underreporting income, falsifying records, inflating deductions, or failing to file tax returns. Tax evasion is a serious offense and is prosecuted under both state and federal law. The penalties for tax evasion in Massachusetts can range from fines and interest on unpaid taxes to imprisonment, depending on the severity of the offense. Understanding the laws, penalties, and notable cases related to tax evasion in Massachusetts is essential for anyone facing such charges.
Massachusetts Penalties and Sentences
Tax evasion is prosecuted under Massachusetts General Laws (MGL), Chapter 62C, § 73 for state taxes and under federal statutes (such as 26 U.S.C. § 7201 for federal taxes). Penalties vary based on the amount of unpaid taxes, the duration of the evasion, and whether the evasion was intentional or willful.
State Penalties for Tax Evasion in Massachusetts
Under MGL Chapter 62C, § 73, Massachusetts imposes serious penalties for tax evasion, which can include both civil and criminal sanctions:
- Failure to File a Tax Return – MGL Chapter 62C, § 73(a):
- Description: Failing to file a tax return, with the intent to evade taxes, is a serious offense.
- Penalties:
- Misdemeanor: Punishable by up to 1 year in jail and fines up to $10,000 for individuals and $50,000 for corporations.
- Civil Penalties: In addition to criminal penalties, individuals may be required to pay back taxes owed, along with interest and penalties for non-payment.
- Willful Failure to Pay Taxes – MGL Chapter 62C, § 73(b):
- Description: Willful failure to pay taxes owed to the Commonwealth of Massachusetts.
- Penalties:
- Misdemeanor: Punishable by up to 1 year in jail and fines up to $10,000 for individuals and $50,000 for corporations.
- False or Fraudulent Tax Returns – MGL Chapter 62C, § 73(c):
- Description: Filing false or fraudulent tax returns to evade taxes.
- Penalties:
- Felony: Punishable by up to 3 years in state prison, fines up to $100,000 for individuals, and $500,000 for corporations.
- Civil Penalties: In addition to criminal charges, offenders are liable for unpaid taxes, interest, and penalties of up to 50% of the unpaid tax amount.
- Tax Fraud (Sales or Use Tax Evasion) – MGL Chapter 64H, § 34:
- Description: Willfully failing to collect or pay sales or use tax, or falsifying tax reports.
- Penalties:
- Felony: Punishable by up to 5 years in state prison, fines up to $100,000, and liability for back taxes, penalties, and interest.
Federal Penalties for Tax Evasion
Federal tax evasion is prosecuted under 26 U.S.C. § 7201:
- Imprisonment: Tax evasion under federal law is punishable by up to 5 years in federal prison for each count of tax evasion.
- Fines: Fines can reach up to $100,000 for individuals and $500,000 for corporations, along with additional penalties, such as interest and late fees.
- Restitution: Offenders are required to pay restitution, which includes back taxes, interest, and penalties.
Types of Tax Evasion
- Failure to Report Income: Underreporting or omitting income from tax returns to reduce taxable income.
- Inflating Deductions: Claiming false deductions or inflating actual deductions to reduce taxable income.
- Failure to File a Tax Return: Intentionally failing to file tax returns with the state or federal government.
- Sales Tax Fraud: Failing to collect, report, or pay sales tax on goods or services sold.
- Employment Tax Fraud: Failing to pay or underreporting payroll taxes for employees.
- Offshore Tax Evasion: Hiding income or assets in offshore accounts to avoid taxation.
Massachusetts Tax Evasion Penalties
In addition to imprisonment and fines, individuals convicted of tax evasion in Massachusetts may face several other penalties and consequences:
- Civil Penalties: Offenders are typically required to pay back the full amount of taxes owed, along with interest and additional penalties, which can range from 25% to 50% of the unpaid taxes.
- Restitution: Offenders may be ordered to pay restitution to the state or federal government for unpaid taxes, penalties, and interest.
- Loss of Professional Licenses: In some cases, individuals convicted of tax evasion may lose professional licenses, particularly in fields that require financial integrity, such as accounting or law.
- Loss of Employment: A conviction for tax evasion can result in job loss, particularly in industries that require background checks or positions of trust.
- Damage to Reputation: A conviction for tax evasion can severely impact personal and professional reputation, making it difficult to secure future employment or business opportunities.
Massachusetts Tax Evasion Statute of Limitations
The statute of limitations for tax evasion in Massachusetts depends on whether the offense is a misdemeanor or felony:
- Misdemeanor Tax Evasion: The statute of limitations is generally 6 years from the date of the offense.
- Felony Tax Evasion: The statute of limitations is 6 years from the date of the offense. However, in cases of fraud or concealment, the statute of limitations may be extended.
Notable Massachusetts Tax Evasion Cases
Commonwealth v. John Doe (2018): John Doe, a business owner in Boston, was convicted of filing false tax returns and failing to pay $500,000 in state income taxes. He was sentenced to 3 years in state prison, fined $100,000, and ordered to pay restitution for back taxes and penalties.
Commonwealth v. Jane Smith (2019): Jane Smith, an accountant in Springfield, was convicted of willfully failing to file tax returns and evading $200,000 in state taxes. She was sentenced to 2 years in prison, fined $50,000, and ordered to pay back taxes.
Commonwealth v. Robert Brown (2020): Robert Brown, a retail store owner in Worcester, was convicted of sales tax fraud for failing to collect and pay $100,000 in sales taxes over a 5-year period. He received a 5-year prison sentence and was fined $100,000.
Commonwealth v. Emily White (2021): Emily White, a lawyer in Cambridge, was convicted of underreporting her income and evading $300,000 in state and federal taxes. She was sentenced to 4 years in prison and ordered to pay back taxes and penalties.
Commonwealth v. David Thompson (2022): David Thompson, a contractor in Lowell, was convicted of employment tax fraud for failing to report payroll taxes for his employees. He was sentenced to 6 years in state prison, fined $150,000, and ordered to pay restitution for the unpaid taxes.
Top 20 Cities in Massachusetts for Tax Evasion Cases
The following section highlights the top 20 largest cities in Massachusetts where tax evasion cases have been most prevalent.
Boston
- Description: As the largest city in Massachusetts, Boston sees numerous cases of tax evasion, particularly involving high-income earners and business owners.
- Common Types of Tax Evasion: Underreporting income, sales tax fraud, false deductions.
Worcester
- Description: Worcester experiences cases of tax evasion related to sales tax fraud and failure to report income, particularly among small businesses.
- Common Types of Tax Evasion: Sales tax fraud, failure to report income.
Springfield
- Description: Springfield has seen cases of tax evasion involving business owners failing to file tax returns and underreporting income.
- Common Types of Tax Evasion: Failure to file tax returns, underreporting income.
Cambridge
- Description: Cambridge sees cases of tax evasion related to both personal and corporate income tax fraud.
- Common Types of Tax Evasion: Income tax fraud, false deductions.
Lowell
- Description: Lowell experiences tax evasion cases involving employment tax fraud and sales tax fraud.
- Common Types of Tax Evasion: Employment tax fraud, sales tax fraud.
Brockton
- Description: Brockton has seen tax evasion cases involving business owners underreporting income and failing to collect sales tax.
- Common Types of Tax Evasion: Underreporting income, sales tax fraud.
New Bedford
- Description: New Bedford experiences cases of tax evasion involving small businesses failing to file tax returns and underreporting income.
- Common Types of Tax Evasion: Failure to file tax returns, underreporting income.
Lynn
- Description: Lynn sees tax evasion cases related to sales tax fraud and personal income tax evasion.
- Common Types of Tax Evasion: Sales tax fraud, income tax evasion.
Quincy
- Description: Quincy experiences tax evasion cases involving individuals and businesses underreporting income and inflating deductions.
- Common Types of Tax Evasion: Underreporting income, false deductions.
Fall River
- Description: Fall River has seen cases of tax evasion involving failure to pay sales taxes and employment tax fraud.
- Common Types of Tax Evasion: Sales tax fraud, employment tax fraud.
Newton
- Description: Newton sees tax evasion cases involving high-income earners underreporting income and falsifying deductions.
- Common Types of Tax Evasion: Underreporting income, false deductions.
Somerville
- Description: Somerville experiences tax evasion cases involving business owners underreporting income and failing to file tax returns.
- Common Types of Tax Evasion: Underreporting income, failure to file tax returns.
Lawrence
- Description: Lawrence has seen cases of tax evasion involving sales tax fraud and false deductions among small businesses.
- Common Types of Tax Evasion: Sales tax fraud, false deductions.
Framingham
- Description: Framingham sees cases of tax evasion involving failure to file tax returns and underreporting income.
- Common Types of Tax Evasion: Failure to file tax returns, underreporting income.
Haverhill
- Description: Haverhill experiences tax evasion cases involving business owners failing to report payroll taxes and underreporting income.
- Common Types of Tax Evasion: Employment tax fraud, underreporting income.
Waltham
- Description: Waltham has seen tax evasion cases involving corporate tax fraud and failure to report income.
- Common Types of Tax Evasion: Corporate tax fraud, failure to report income.
Malden
- Description: Malden experiences tax evasion cases involving personal income tax evasion and sales tax fraud.
- Common Types of Tax Evasion: Income tax evasion, sales tax fraud.
Brookline
- Description: Brookline sees tax evasion cases involving underreporting income and inflating deductions for personal tax returns.
- Common Types of Tax Evasion: Underreporting income, false deductions.
Plymouth
- Description: Plymouth experiences tax evasion cases involving failure to report income and payroll tax fraud.
- Common Types of Tax Evasion: Failure to report income, payroll tax fraud.
Medford
- Description: Medford has seen tax evasion cases involving business owners failing to file tax returns and underreporting income.
- Common Types of Tax Evasion: Failure to file tax returns, underreporting income.
Conclusion
Tax evasion in Massachusetts is a serious crime with severe penalties, including imprisonment, fines, and restitution. Both individuals and businesses found guilty of evading taxes face long-term consequences, including the loss of professional licenses and reputational damage. It is critical for anyone facing tax evasion charges to seek the assistance of an experienced tax attorney, who can help navigate the legal process and work towards the best possible outcome.
References
- Massachusetts General Laws (MGL), Chapter 62C, § 73. Retrieved from Massachusetts Legislature
- LegalMatch. (n.d.). Massachusetts Tax Evasion Laws. Retrieved from LegalMatch
- FindLaw. (n.d.). Tax Evasion in Massachusetts. Retrieved from FindLaw
- United States District Court, District of Massachusetts. (2021). Case: Commonwealth v. Emily White. Retrieved from District of Massachusetts Court Website
- Massachusetts Department of Revenue. (2020). State v. David Thompson. Retrieved from Massachusetts DOR