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Criminal Tax Evasion–Can I Go to Jail for not Filing or Paying my Taxes?
It is shocking how many taxpayers do not file, pay their taxes or simply file false returns whether intentional or not. Sometimes these violations are quite innocent where a taxpayer simply forgets to file or to report something on their return or returns.
It often times snowballs with one troubling year turning into several. Taxpayers then tend to “freak out” thinking they will go to jail if they don’t pay up to the IRS or start filing those unfiled tax returns. You can certainly go to jail for not filing, lying on your returns and/or not paying your taxes. However, it is actually quite rare to be selected. Additionally, the IRS is much more lenient if you simply cannot pay the IRS tax debt due to financial hardship.
What is criminal tax evasion?
Tax evasion is a type of tax fraud and is one of the most common tax crimes. It involves using illegal methods to avoid paying or filing taxes. Under the tax code, any person who willfully attempts to evade or defeat any tax imposed or to fail to make payment, in addition to other penalties provided by law, will be guilty of a felony and:
- Shall be imprisoned not more than 5 years
- Or fined not more than $100,000 for individuals ($500,000 for corporations)
- Or both, together with the costs of prosecution
Most IRS tax liabilities are civil rather than criminal. Taxpayer problems commonly result from an audit. If it turns out tax is assessed and owed, generally, a civil judgement is placed against the taxpayer to collect upon the tax debt.
On the other hand, depending on the severity of what the auditor finds during an audit, you may find your chances of jail time increasing. See article, “Ways to Increase your Chances of an IRS audit and Jail Time.”
The auditor may detect some potential evasion activity that may land you in an IRS criminal investigation. In this case, you may go to jail, however this cannot happen until you are actually charged with a tax crime, prosecuted and sentenced in a criminal proceeding.
Common acts of tax evasion and criminal tax evasion include:
- failure to file a tax return
- filing a fraudulent tax return
- removal of assets outside the reach of the IRS (i.e., quitclaiming house to a relative)
- concealment of income earned (i.e., being paid in cash and not reporting the income)
- failure to pay taxes or assessed tax debt when you have the ability to pay
- claiming personal expenses as business expenses.
- deliberate destruction of records
- evidence of consistent underreporting of income
- refusing to cooperate with an auditor or examiner
Also take a look at the “IRS ‘Dirty Dozen’ list of tax scams for 2018,” showing timely examples of tax evasion.
Can’t Pay? Consider your tax resolution options
- Offer in Compromise—settling your debt for less than you owe. It allows you to settle your tax debt in a lump sum payment or with a short-term payment plan. As with the Installment Agreement, you can attempt to negotiate with the IRS to accept a lesser amount that what you owe to satisfy your tax liability.
- Payment plan/installment agreement— allows you to pay off your tax debt over time. Usual agreements range from three to seven years. You can elect to pay off the entire amount over time or attempt to negotiate a reduced payoff amount (i.e. partial payment installment agreement). With a PPIA, a full set of financials is required to be submitted to the IRS showing you can only pay a reduced amount.
- Currently Not Collectible (CNC) status—due to your financial hardship, the IRS will suspend collection activity against you. This is just a temporary fix, until your financial condition approves. It is a valuable resolution option because it can allow you time to get your finances in order.
Taxpayers needing tax help with regard to a potential or current tax evasion issue should seek the advice of a tax attorney. The San Diego Tax Attorneys at Delia Law have many years of tax resolution experience and will competently represent you before the IRS. Please call for a no-cost tax attorney consultation for tax resolution at (619) 639-3336. We look forward to helping you.
This blog post is not intended as legal advice and should be considered general information only.
Keywords: Criminal Tax Evasion, Tax Fraud, Tax Audit, IRS Criminal Investigation, Tax Attorney