Criminal charges and jail time do not apply to all tax situations. Using mistakes as excuses can be criminal, but honest mistakes aren't. While the IRS doesn't pursue criminal tax evasion cases for many people, the penalty for those caught is severe. They must reimburse their taxes with a costly fraud penalty and possibly face jail sentences of up to five years.
You can only go to jail for breaking tax law if criminal charges are filed against you and if you are prosecuted and sentenced in criminal proceedings. The most common tax crimes are tax fraud and tax evasion. Tax evasion occurs when you deliberately try to evade taxes. Tax fraud involves intentionally trying to deceive the IRS.
If the court finds you guilty of evading taxes, you can be sent to federal prison for up to five years. We don't guarantee that your tax debts will be paid off within a specific period or that your debt will be reduced by a certain amount or percentage. Unlike tax evasion, tax evasion is deliberately withholding information about your income, bank accounts, or other financial assets so that you can pay less taxes. Assuming you can demonstrate reasonable cause, the IRS offers several options to help taxpayers who have gotten into trouble.
If you end up in that situation, you'll likely need to consult a tax lawyer to ensure you get the best possible outcome. In fact, fear of an IRS audit is one of the main reasons why people struggle to file timely and accurate tax returns every year. Filing your tax returns requires you to deal with two scary things that you can normally avoid for the rest of the year, namely math and letting the authorities deal with your personal financial behaviors. Those who avoid paying taxes do not hide or misrepresent, but rather shape and plan events in advance to reduce or eliminate the tax liability within the parameters of the law.
If your violation results in a larger tax bill or significant interest payment, you can request a payment plan. That said, having them sent to jail by the IRS isn't the kind of thing that happens to ordinary Americans who make a mathematical mistake. However, to receive a commitment offer, you'll need to make sure you're up to date with all your tax returns and estimated payments. If you make a mistake on your taxes, you might have to pay penalties, but you can't be criminally charged with tax fraud unless you intentionally make false statements in the documents you file with the IRS.
At this point, the auditor refers the case to the Criminal Investigation Division of the IRS to investigate John for probable tax fraud. The IRS may also decide to file a federal tax lien notice in public records to alert your creditors that the IRS is reclaiming all your assets, including any assets you may purchase after notification of the federal tax lien.
