Can You Go To Jail For Not Paying Taxes?

Can the IRS Arrest You?

Cheating on your taxes is a crime. No doubt about that. However, only 0.002% of all taxpayers are convicted of tax crimes. Even though roughly 16% of Americans are found to be evading taxes every year, in one way or another.

As for the number of convictions for tax crimes, it has stayed relatively stable over the most recent 5-year period (less than 1% increase). This means that a person is rarely sent to jail for tax fraud.

However, there is some fine print you do need to read, as not all cases end up being punished with penalties and fines. Some may as well put you behind bars. This is a topic that we get asked about a lot so we wrote this article to answer some commonly-asked questions.

Can You Go to Jail For Tax Evasion ?

The majority of cheating cases come from tax evasion, which is the deliberate underreporting of income (willful or actual). This is the type of tax crime that is charged the most often. Lying to the IRS can result in criminal prosecution.

Truth be told, it can be tempting for some taxpayers to fudge the numbers to improve their tax refund. Nevertheless, misrepresenting yourself on your tax return can get you into trouble as it is considered tax fraud. So, you could be (1) audited, (2) fined considerable amounts, or (3) put to jail.

Remember that the IRS knows whether you report all of your income or not. As it gets all of the 1099s and W-2s you receive. Your financial activity may also raise some red flags with the IRS. In case you are thinking of hiding income in the form of cash payments.

All these may trigger a tax audit. This is an in-depth review of your financial records and taxes to make sure everything has been reported accurately.

Facing an audit is rare, with less than a 1% chance. But mostly, it’s just not worth taking the risk. It involves a costly and time-consuming procedure, where you are called to present years of documentation. You may even be called in for multiple in-person interviews.

How Long Do You Go To Jail for Tax Evasion?

Your jail fate from an IRS audit? It hinges on guilt for tax fraud or evasion – the charges that mean jail time or not.

In general, an incorrect tax return case (i.e., under-reporting your income) comes with late payment penalties. While you may also be charged interest on the underpayment but you will not go to jail for it.

And, don’t fool yourself into thinking that tax fraud or evasion affects high earners only. Everybody should be careful, even those with low income.

The IRS treats cases the same, no matter how much you are underpaid or your income level. Falsifying any information on a tax return can end up with you being fined up to $250,000.

Can the IRS Put You In Jail?

In a nutshell, no. The IRS cannot send you to jail. However, the court can. When an IRS auditor audits your tax returns and detects possible fraud, they can initiate a criminal investigation.

It should be noted that around 3,000 taxpayers are convicted of tax fraud every year. So, lying on your taxes is, indeed, a big deal for the IRS. Overall, though, the IRS rarely charges taxpayers with fraud. Therefore, even if you are investigated, you will probably not face a criminal charge.

That being said, though, lying on a tax return carries potentially severe consequences. It is just not worth the risk; you may end up having to pay way more than the sum you are attempting to hide.

How Much Taxes Do You Have to Owe To Be Sent to Jail?

As already mentioned, the chances of facing criminal fraud penalties are very slim. In the overwhelming majority of cases (at least 98%), the IRS punishes this type of fraud with CIVIL penalties.

This simply means that you will be called to pay a 75% fine that will be added to the tax due, plus interest on both the fraud penalty and the tax. So, if you owe $10,000 from tax fraud, you will have to pay an extra $7,500 as a penalty.

Things change dramatically, though, when the IRS suspects that you have gone too far. In this case, it may call the CID (Criminal Investigation Department) to investigate your situation. The CID then has two options:

(1) recommend that the Justice Department prosecute you or

(2) drop it forever, depending on its findings

The good news is that the CID does not usually recommend prosecution except in very rare cases.

Of course, the larger the sum you tried to hide, the more likely CID agents will recommend prosecution. In criminal cases, the typical amount of taxes owed is at least $70,000. This usually refers to tax cheating activities over a three-year time span (or more).

To sum up, the IRS itself can NOT prosecute you, but the CID can recommend prosecution. If it does, and you get convicted by the Justice Department, you may be fined, put on probation, imprisoned, or all three. The bad news is that if you are brought to court, there is more than an 80% chance of getting convicted. And a high chance of going to prison even if you have a spotless criminal record.

Tax Crimes That CAN Put You In Jail

Individuals who are recommended prosecution by a CID agent are typically charged with one of the following three crimes:

(1) failing to file a tax return

(2) filing a false return, or

(3) tax evasion

Here are some details about each:

Failing to file a tax return. This is the least serious tax crime of the three and is defined as not filing a return intentionally. So, if you must file tax returns and you do not, the maximum prison time you can get is 12 months and/or a $25,000 fine for each year you have not filed. However, most non-filers only get civil penalties and are rarely prosecuted criminally.

Filing a false return. This is the case where you file a tax return that contains a material misstatement. This is less serious than tax evasion and can get you behind bars for up to 36 months. Also, according to the Internal Revenue Code §7206 (1), you will be fined a maximum of $100,000.

Tax evasion or fraud. This is the most serious thing you can be charged with as it is considered a felony rather than a misdemeanor. Which is the case with the two situations mentioned above. Tax fraud or evasion is when you try to defeat the income tax laws intentionally. It carries a maximum prison sentence of five years. The fine you will also be called to pay per the Internal Revenue Code §7201 is up to $100,000.

Important Note: The CID can also recommend prosecution for filing false claims against the IRS and for money laundering. These aren’t exactly tax crimes, but they often get lumped in with tax crimes against the same taxpayer.

Can You Get Arrested for Not Paying Taxes?

The truth is that failing to pay your taxes can eventually initiate a process to send you to prison. But, the IRS does not have the power to put you behind bars. Nor file criminal charges against you if you have not paid your taxes, as already explained. Nevertheless, some exceptions apply.

It all depends on the reason for not paying the due amount. If you can’t because you do not have the money, you are in the clear. But, if you intentionally try to deceive the IRS or lie on your tax return, this is regarded as tax fraud. And you could end up serving jail time.

Will I Go To Jail For Not Filing Taxes?

Let’s take things from the beginning, though. Bear in mind that most tax crimes are NOT criminal cases; they are considered civil cases. This is because the IRS understands that taxes can be confusing.

You could fill out your return incorrectly due to the complexity revolving around filing tax returns. If you mess up or miss a document, the IRS will probably send a letter. You’ll be asked to fix your mistakes by amending your return.

If you made a more serious error, the IRS will probably audit you and place a civil judgment against you. Again, this will NOT put you in jail as it is NOT a criminal act. It is simply a notice that you need to change your tax return and pay back your unpaid taxes.

This is not the case when you intentionally change your taxes, file fraudulent taxes or fail to file. If the IRS believes you’re not filing or purposely filling it out wrong (which is tax evasion), you could end up in jail.

Should You Be Concerned About IRS Jail?

Generally speaking, it is extremely rare for the IRS to charge a person with a tax crime and attempt to send them to jail. So for the most part, you don’t have to worry about the IRS sending you to jail.

Tax avoidance, making false statements and failure to file tax returns could result in prosecution.

But with that said, not filing your tax return or trying to hide income from the IRS is not worth it in the long run. You will probably end up paying much more than the taxes you want to evade.

Struggling to pay taxes? There are ways to get relief from that tight spot.

Facing IRS tax issues can be daunting, and the fear of potential consequences, like jail time, can be overwhelming. It’s crucial to seek professional assistance to resolve these concerns promptly.

Don’t delay getting the help you need to address your tax problems. Explore the options available to you for IRS tax resolution. Getting the right support can help ease your worries and guide you toward a resolution.

Feel free to contact us and we’ll help you find the best solution to your problem.