Can You Go To Jail For Not Paying Taxes?
There is something slightly suspicious about the fact that both the state and federal hovernments seem to know exactly what you owe them in taxes, and yet every year you have to break it down yourself when filing. They won’t tell you what you owe, but if you guess or conclude the wrong amount or even fail to pay by the deadline, it feels like you could immediately be sentenced and spend years in prison.
Read: What To Do If You Owe Back Taxes to the IRS
Yes, paying your taxes is important, but making a mistake won’t result in a life behind bars. The difference between not making a tax law error and breaking it altogether ultimately comes down to intention.
3 Main Ways You Could Go To Jail Involving Taxes
Though you won’t get a prison sentence for making a mistake when you file a tax return, tax crimes are a much different ball game and can result in criminal penalties or you facing jail time.
Evading your taxes
Not filing your taxes
Tax fraud
1. Evading Your Taxes
If you knowingly try to hide funds or pay less in taxes than what your assets or income would indicate, you could be accused of tax evasion. The following are signs the IRS could interpret as tax evasion:
Trying to alter your tax liability by transferring assets to another party in the hopes of paying less in taxes.
When you claim false deductions, credits or less income than what you’ve made.
If you conceal assets or funds so you won’t have to pay taxes on them.
Creating fake documents or falsifying current documents.
Helping Somone Else Evade Taxes
Tax evasion on your own taxes is bad, but if you attempt to help someone else with their tax evasion you could also get into trouble with the IRS. Just because they aren’t your taxes does not mean you won’t be responsible for falsifying documents on their behalf or aiding in the transfer of funds to avoid a true assessment of their tax liability and returns.
2. Not Filing Your Taxes
Consistent failure to file your taxes results in unpaid taxes which could land you in some pretty hot water with the IRS. When it comes down to brass tax, failing to file means they don’t get their money, which is the whole goal. There is a difference between missing a deadline and purposefully not filing and here are some parts of your payment history that the IRS will flag and could potentially use against you:
You have consistently or repeatedly not filed your taxes in the past.
The notices the IRS has sent you have gone unanswered.
They discover you have concealed assets or other sources of income.
You have prepared your prior tax returns in a misleading or understated way and don’t have documents to back up your claims.
You refuse to cooperate with IRS employees on their inquiries into your tax returns.
You cannot provide a valid reason for not filing your taxes.
3. Tax Fraud
Though tax fraud is the main umbrella under which most tax crimes fall, it in and of itself could get you sentenced to years in jail–just ask Al Capone. If the IRS can prove you intentionally defrauded the government or failed to pay taxes you owe, you could be serving some jail time.
Common Tax Mistakes That Won’t Send You To Jail
If you are not a CPA or tax attorney, and can’t afford to pay one, chances are you may not know every in and out of filing your taxes. Worry not, as there are many areas where you can error in taxes that are both easily fixed with the help of tax relief professionals such as Tax Relief Advocates, and not penalized with jail time. Here are some common unintentional tax mistakes:
Filing mistakes: If you make a mistake on your tax returns the IRS will typically just notify you of this and give you a chance to correct it. Be sure to do so as if you don’t it could result in fines or heavy interest penalties.
Not having enough money: Payment plans are available but you need to file for them as the IRS can apply late payment penalties. You can also get an offer in compromise that allows you to settle your tax debt for less than you owe.
Tax avoidance: There is a difference between tax avoidance and tax evasion. Avoidance involves utilizing legal tax strategies to pay less in taxes and won’t be punished, whereas evasion is illegal and will.
Final Take To GO
If you discover an error in your tax returns there are many steps to take to rectify it before you getting sent to jail is even considered by the IRS. Paying your taxes on time and to the best of your ability is important, but as long as any mistake you’ve made is unintentional, you should be okay. If you need help, consider getting guidance from reputable tax service companies, such as Tax Relief Advocates.
Where you will cross paths with both the tax man and the lawman is if you are intentionally committing any version of tax fraud to extreme levels. The IRS doesn’t want to send you to jail; they want your money, so as long as you pay your taxes or retroactively pay the fines you should be able to avoid going to jail where your taxes are concerned.
FAQ
Here are some answers to frequently asked questions about what will land you in jail where your taxes are concerned.
At what point does the IRS put you in jail?
Making a mistake on your taxes or a minor tax liability won't necessarily land you in jail, but major infractions such as tax fraud, tax evasion or simply not filing your taxes could be heavily penalized by the IRS and could result in hefty fines or even a jail sentence.
How likely are you to go to jail for not filing taxes?
o If you have missed the tax deadline, don't panic as there are extensions you can file for or help and advice you can receive from a CPA or tax attorney. However, if you have a history of not filing your taxes, you could face heavier penalties from the IRS such as financial penalties or jail time.
Can the IRS send you to jail for not paying taxes?
Yes, the IRS can send you to jail for not paying your taxes. However, there are extenuating circumstances where you could have a valid reason not to pay your taxes such as insufficient funds where you could negotiate your taxes or even get an offer in compromise that allows you to settle your tax debt for less than you owe.
This article originally appeared on GOBankingRates.com: Can You Go To Jail For Not Paying Taxes?
