- Tax fraud, tax evasion, and willfully failing to file may lead to jail time and high fines
- The IRS won’t send you to prison if you forget to file your tax return one year or you make a mistake on your tax return
- Five ways to avoid legal problems:
- Don’t miss any filing deadlines
- Pay the tax you owe right away
- Check everything for mistakes
- Always be honest
- Talk to a tax attorney
Many taxpayers worry that making a tax mistake can lead to serious penalties or prison time. As long as you do everything honestly, you have little to worry about. You may still be wondering, however, “Can you go to jail for not filing taxes?” The important thing to remember is you won’t be convicted of tax crimes if you simply make a mistake or forget to file your taxes one year. You have to willfully do something wrong. This guide covers everything you need to know.
Can You Go to Jail for Not Paying Taxes?
The IRS uses many tactics to collect what’s owed to the agency. That means you technically can face time in jail for certain tax crimes. Examples include:
- Tax fraud: This is when you deliberately use false information on your tax return or omit information on purpose. Tax fraud typically happens when people want to pay less tax than they owe, so they knowingly send the IRS false data on their tax documents.
- Tax evasion: This is when you do something illegal to avoid actually paying taxes you owe. Evasion is a type of tax fraud, but it can have more serious consequences.
- Failing to file: You probably won’t face charges if you forget to file your tax return. The actual crime requires that you knowingly didn’t file. Willfully failing to file is illegal.
These willful crimes can lead to serious felony charges and convictions. The Tax Crimes Handbook from the IRS states that anyone who willfully attempts to evade or defeat tax will be guilty of a felony and may have to pay hundreds of thousands of dollars, serve no more than five years in prison, or both.
The IRS, however, can’t put you in jail if you make a tax filing mistake by accident or you’re unable to afford your tax bill. Audits seldomly lead to jail time, either. Tax avoidance is different from fraud or evasion in that it involves legally reducing your tax burden. An example would be planning or adjusting your investment strategy in a way that lowers your tax liability. This is not illegal.
Cases and Outcomes of Failing to File or Pay Taxes
Your situation likely won’t lead to jail time. It’s helpful to look at some real cases that ended in the taxpayer going to jail, however, including what they did that led to that sentence. Here are two recent examples from the Department of Justice:
Prison Sentence for Failing to File
A man in Texas was sentenced to a year in prison and a year of supervised release, plus he had to pay $164,032 in restitution. He willfully failed to file his tax returns for seven years, even though he was legally required to do so. The man earned over $460,000 from his business, but spent the money on personal costs, including real estate and gambling.
Prison Sentence for Tax Fraud
A woman in Maryland was issued a sentence of three years in prison because she prepared false tax returns for other people. She was part of a tax fraud scheme that extended around the nation. This woman sought to get more than $6.6 million in IRS tax refunds. She further tried to convince one of her clients to lie to the IRS about her involvement in their tax return preparation.
Minor cases of tax mistakes don’t make the news like these cases do. Take for example a man with average income who made a math mistake on his tax return that impacted the income he reported. He probably wouldn’t be charged with a crime. The IRS would send out a notice informing him of the discrepancy based on the information the agency received from the man’s employer. The man could then look for the mistake, resolve the issue, and send an amended tax return if necessary. The issue would likely be resolved at that point.
It’s worth noting that sometimes mistakes do lead to fines. A person must have willfully done something illegal, as mentioned, to be charged with a tax crime. Talk to a tax attorney whenever you have questions.
Five Ways to Avoid Legal Problems With Your Taxes
You most likely won’t have to deal with criminal charges or jail time for making a tax mistake, as discussed above. You should still follow best practices to ensure you never get into legal trouble with the IRS and to avoid expensive penalties. Here’s what to do:
1. Don’t Miss Any Filing Deadlines
Make sure you never miss the tax deadline, which is usually April 15 for annual tax returns. The deadline is April 18 in 2023 (deadlines can move each year depending on holidays and weekends). You may have to pay quarterly taxes, too, so don’t forget to submit your estimated payments by the deadlines each quarter if needed.
2. Pay the Tax You Owe Right Away
Pay taxes as soon as possible after you file your tax return. Some taxpayers can request to set up a payment plan if they can’t afford to pay in full right away, but you should still submit your tax return by the deadline. You want to avoid failure-to-file penalties. Pay as much as you can right away, and then look into an installment plan for the rest.
3. Check Everything for Mistakes
Make sure you triple check all the information you include on your tax return. All of your income needs to appear exactly as it is on your W-2 or 1099s. Review your data before sending everything to the IRS.
4. Always Be Honest
You will likely avoid serious legal problems if you are open and honest with the IRS. Following deadlines and communicating with the agency will help you find a solution – even if you can’t pay the tax you owe or are nervous about submitting your return.
5. Talk to a Tax Attorney
Contact a tax attorney anytime you’re uncertain about filing or paying your taxes. You want to do everything you can to avoid tax issues, especially if you think they could lead to a legal problem with the IRS.
Remember that anytime you receive a notice in the mail from the IRS, respond right away with all the information they request. Responding to these notices promptly can help you avoid additional fees.
Contact the Experts at Silver Tax Group With Questions
Most people don’t go to jail for making a tax mistake. You won’t have to deal with jail time even if you’re audited by the IRS in most cases. Only serious cases of tax fraud and evasion, where there was willful intent, typically lead to prison sentences. Talk to a tax professional, however, if you make a mistake or forget to file your tax return so you can avoid unnecessary stress and hassle. Reach out to Silver Tax Group to speak to an expert about tax fraud, tax evasion, or any other tax issue.