What Is Tax Evasion?
If you are new to rental property investment, you should be aware of the different issues related to the taxation of rental income. No landlord should think that they can actually evade filing income tax. Tax evasion is one of the most serious crimes, with heavy penalties and may even lead to imprisonment. According to reports, there are more and more cases against landlords for evading taxation. Therefore, as a landlord, if you do not want to be punished, you should be responsible for paying income taxes and liabilities.
What really is tax evasion? Well, tax evasion is an illegal act in which the landlord deliberately avoids paying their tax liability. Those arrested for tax evasion will be subject to significant penalties and criminal charges. However, there is a considerable difference between tax evasion and tax avoidance or minimization. All property owners have the right to reduce taxes, but should follow legal means.
Regardless of what state to which your rental property belongs, as a landlord, you have a legal responsibility for filing a tax return each year, declaring your rental income honestly and paying the tax due. Deliberately or intentionally falsifying your declaration, or hiding your incomes and assets constitutes tax evasion. Although some landlords deliberately commit tax evasion, others have evaded taxes because of negligence and ignorance of laws.