In addition to preparing tax returns, practitioners may provide additional related services, such as tax planning. Practitioners who engage in tax planning and provide tax advice must keep these rules in mind.
Tax Planning - Tax planning to reduce tax liability is a legitimate goal. However, if the planning includes an element of fraud, deceit, or concealment, it becomes tax evasion. Practitioners who engage in tax planning should keep the following references in mind.
• IRC §7201 relating to tax evasion
• IRC §7206 relating to false returns, concealment, and other prohibited conduct
• Requirements for written advice under Circular 230, §10.37
Tax Evasion - IRC §7201 states that any person who willfully attempts to evade any tax imposed by the Code (including evasion of tax payments assessed under the Code) is subject to felony conviction. Upon conviction, IRC §7201 provides a fine of up to $100,000 ($500,000 for a corporation), or five years’ imprisonment, or both (along with the costs of prosecution). Moreover, under the same Code section, a fine of up to $250,000 may be imposed for tax evasion.
Read more (including some specific examples of tax avoidance vs tax evasion).