Simply put yet, you could go to jail for tax evasion. The IRS casually checks taxpayers’ obligations yearly, and there is a chance you can go to jail when you don’t file your taxes. Moreover, you can go to jail when you deliberately lie on your tax return. However, you won’t have to go to jail if you cannot pay back to the IRS what you owe. Therefore, it’s in the IRS’ best interest to come to an agreement that suits both parties. In addition, the IRS cannot cause financial hardship and must accommodate solutions for special cases.
It might have started innocently enough. One year, you failed to pay your taxes. After then, one year went into several. You don’t have enough cash to cover your debt, and you’re now considering going to jail for not paying taxes.
Will I go to prison for tax evasion?
There is a general fear among taxpayers that they’re going to come across IRS audits. Perhaps if you made a mistake in your tax filing, there is a chance that you will be audited. The IRS will pick out cases where any particular entries stand out. However, the fear of IRS audits helps people file their taxes correctly and in time and helps the IRS avoid many tax violations.
But the truth is that very few taxpayers are imprisoned for tax evasion. Out of 150 million taxpayers, the IRS only indicted 1,330 for legal-source tax evasion in 2015. People who understate their debt are the major focus of the IRS. The majority of tax evasion cases begin with people who:
- Falsely claim credits, deductions, or income on tax returns
- Don’t submit a tax return as necessary.
When taxpayers are unable to pay their taxes, the IRS rarely pursues tax evasion prosecutions. The situation changes if you hide assets and income that you should be using to pay back taxes. In most cases, the IRS will help you through your debt by offering payment plans or compromises. However, there are strict qualifications for these programs, and it is advised to get help from a tax consultant to participate in the IRS’ fresh start program.
Actions that can land you in prison
The IRS treats people who file their taxes but cannot pay more leniently than non-filers who do not pay. Therefore, penalties for failure to file are much higher than penalties for late payment. If you file your return, the IRS will not put you in jail for failing to pay your taxes. However, the following actions can result in a one to five-year prison sentence:
- Tax evasion: Any action taken to avoid tax assessment, such as filing a fraudulent return, can result in a 5-year sentence.
- Failure to File a Return: Failure to file a return can result in a year in jail for each year you do not file.
- Helping Someone Evade Taxes: Assisting someone else in evading taxes.
In all of the cases above, you should contact a tax professional and get legal help. Legal help can help you avoid tax debt, penalties, and interest difficulties. Historically, the IRS has been rather forgiving regarding tax debt, and payment usually handles minor offenses easily.
Can you go to prison for lying to the IRS?
The bulk of occurrences of cheating stems from tax evasion, which is about willful, intentional evasion rather than an honest mistake. A tax evasion charge is the most common sort of tax evasion accusation. In most cases, some taxpayers may be tempted to falsify the statistics to increase their tax refund. Nonetheless, misrepresenting yourself on your tax return might get you in hot water since it is considered tax fraud. As a result, you might be audited, fined heavily, or even imprisoned.
Perhaps the first mistake is that many people think the IRS is unaware of all the data, but that couldn’t be further from the truth. The IRS knows whether or not you disclose all of your income since it receives all of your 1099s and W-2s. The IRS may also raise some red flags about your financial behavior, especially cash payments. All of this may result in a tax audit, which is an in-depth check of your financial records and taxes to ensure that everything has been recorded correctly.
Factually, there is a less than 1% probability of getting audited. Most of the time, it is just not worth the risk because it includes a costly and time-consuming procedure in which you must provide years of evidence. You could even be summoned for repeated in-person interviews.
Whether you go to prison for an IRS audit or not depends entirely on how the IRS determines whether you are guilty of tax fraud or evasion. In general, an erroneous tax return case, like an understatement of income, results in late payment penalties and interest on underpayment. Still, you shouldn’t worry too much about going to jail.
Don’t deceive yourself into thinking that tax avoidance or fraud affects the wealthy. Everyone, including the poor, should exercise caution. The IRS does not divide its cases depending on how much you underpaid your taxes or income amounts. However, falsifying any information on a tax return may result in a fine of up to $250,000.
Tax avoidance
There are legal ways to lessen or remove the requirement to pay taxes. This is known as tax evasion. While this might sound illegal, tax evasion is not a crime. Taxpayers have the right to cut, avoid, or minimize their taxes legally. Moreover, tax evasion means a tax avoider does not conceal or falsify anything but rather molds and prepares events to decrease or eliminate tax liability within the confines of the law.
In short, tax evasion is simply a type of acceptable tax planning. Just as using a coupon does not make you a thief, meticulously planning your taxes won’t land you in jail.
Also, tracking your company costs and utilizing tax write-offs is a reasonable technique to save taxes whether you are self-employed or own a business. In addition, a taxpayer establishing a business might opt to incorporate a specific corporation to owe less tax at the end of the year.
Not being able to pay your tax bill
The Fresh Start Program provides plans, strategies, and procedures to assist troubled and stressed taxpayers in quickly repaying their tax obligations using legal means and techniques. The program also helps them avoid the stress and strain of dues and protect themselves from the penalties that come with them in a legal and approved method. The IRS cannot cause financial hardship and will work in both parties’ interest to ensure the debt is repaid.
Don’t ignore your tax bill – Get professional help now
Not submitting your taxes may cost you more money since you may owe interest on your tax debt. Moreover, this interest adds up quickly, as your interest will be calculated using the federal short-term interest rate plus an extra 3%, with daily compounding.
To assess your tax debt, contact one of the certified tax professionals at Idealtax.com. These advisors can negotiate with the IRS on your behalf and help you prevent getting a suboptimal solution for your tax debt. In addition, all of their tax professionals are familiar with the IRS’ processes and will be able to take some weight off your shoulders.