Is Jail a Possibility If You Fail to Pay Your Taxes?

Glen frost

Attorney at Law *

Certified Public Accountant **
Certified Financial Planner®
Master of Laws in Taxation
Every Tax Problem has a Solution

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Columbia, MD 21044

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It is possible for some people to have genuinely overlooked their tax deadline and not paid their taxes that year. And in the case of other individuals, they may have neglected to pay taxes over the course of two or possibly more years due to various reasons including not having the money to do so. If you find yourself in this situation and fear that you will be sent to jail, please know that this may not have to be the outcome. It is true that you can go to jail for not paying your taxes just as you can for filing a fraudulent tax return. But, the one thing that’s important to understand is that you cannot go to jail because you don’t have enough money to pay your taxes.

Criminal Versus Civil Penalties

It is important to remember that if you make an honest error in your tax return, you won’t be facing jail time. A majority of issues surrounding tax liability are not criminal. For example, if you are audited and it turns out that you owe money to the Internal Revenue Service (IRS), a civil judgment will be placed under you so the IRS can collect the money that is due. You can only go to jail if the government files criminal charges against you and you are prosecuted and sentenced.

Some of the most common tax crimes include tax fraud and tax evasion. Tax evasion is when taxpayers use illicit means to avoid paying taxes. Claiming more dependents than you actually have is an example of committing tax fraud. Tax fraud means the individual is deliberately attempting to deceive the IRS. This is significantly different from someone being confused by a tax form or making calculation errors.

What Can Actually Land You in Jail

The IRS won’t file criminal charges against taxpayers just because they don’t have the money to pay. This is a fact. So, when you file your taxes late, the penalties are much higher than when you pay your taxes late. However, the following actions are what could land you in jail:

  • Tax evasion: This is when taxpayers perform actions such as filing fraudulent returns. Those who engage in this practice could face up to five years in prison.
  • Failing to file a tax return: Failing to file a return could lead up to a year in jail for every year you failed to file.
  • Aiding someone to evade taxes: If you help someone else to evade their taxes, you could be looking at a five-year prison sentence depending on the type of allegation.

What Can You Do to Avoid Jail Time?

If you owe more taxes than what you can pay, there are a much better options than not paying your taxes or filing your tax returns. If you owe under $50,000 in taxes, interest and penalties, you could set up an installment agreement with the IRS that allows you to pay down the entire amount over the period of time using regular monthly payments. You could arrange an installment agreement even if you owe more than $50,000. You might just need to provide additional information to the IRS regarding your assets, investments and expenses.

The other option is an Offer-in-Compromise, which is essentially an agreement between the taxpayer and the IRS to settle tax liability for a fraction of the entire amount that is owed. You will most likely not have this option when the IRS has reason to believe that you can pay down your tax debt with a monthly payment plan. So, in order to negotiate an Offer-in-Compromise, you may have to provide the IRS with a detailed account of your income, expenses, assets and investments and prove that you will otherwise be unable to pay off the debt.

A failure to comply with state or federal tax laws can result in serious civil and criminal penalties. The longer you fail to pay taxes or file tax returns, the more dire your situation will get. If you are looking at a mounting tax debt and fear criminal or civil penalties, please contact an experienced Maryland tax lawyerright away to better understand your options.

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