Income tax evasion is defined as wilfully failing to report income or purposely reported incorrect deductions to reduce the amount of taxes owed. Evasion is different from avoidance though there can sometimes be a fine line between the two. Avoidance refers to taking legal steps to minimize taxes. The courts have officially recognized the rights of taxpayers to lawfully minimize their tax liability. Tax evasion is against the law because a person is lying about income or expenses. There are multiple ways to evade taxes including failing to report taxable income such as cash payments or taking personal expense deductions on corporate tax returns. Sometimes tax evaders will overstate deductions or understate profits on transactions. Some tax evaders fail to report illegal income from gambling or drug trafficking. The US tax laws require that both legal and illegal income be reported. Under reporting the value of an estate is another form of tax evasion. Tax evasion is punishable by imprisonment and/or fines and penalties. Hiring legal representation is crucial if the IRS indicates it believes tax evasion is involved, because it may very well be an issue of tax avoidance instead. An agent who suspects fraud has 2 main course of action he or she can follow. The agent can impose a penalty. The agent can also refer the case to the Criminal Investigation Division.