Can You Go to Jail for Not Paying Taxes?

It may have started innocently enough. You forgot to pay your taxes one year. Then one year turned into several years. You don't have the money to pay what you owe, and now you're wondering if you can go to jail for not paying taxes.

The short answer is maybe. You can go to jail for not filing your taxes. You can go to jail for lying on your tax return. However, you can't go to jail for not having enough money to pay your taxes. To better understand these distinctions, take a closer look at when you risk jail time for failing to pay your taxes.

Criminal Vs. Civil Proceedings

Making an honest mistake on your tax return will not land you in prison. Most tax law violations are civil offenses, not criminal. If you're audited and it turns out you owe money, a civil judgment is placed against you to collect the remaining money.

You can only go to jail for tax law violations if criminal charges are filed against you, and you are prosecuted and sentenced in a criminal proceeding. The most common tax crimes are tax fraud and tax evasion. Tax evasion occurs when you willfully attempt to evade taxes. Tax fraud involves intentionally trying to deceive the IRS.

Tax fraud is different than a taxpayer being confused by the tax form or placing numbers in the wrong line.

Actions That Can Land You in Jail

The IRS is more forgiving with people who file their taxes but can't pay as opposed to non-filers who don't pay. Failure to file penalties are much higher than late payment penalties. The IRS will not put you in jail for not being able to pay your taxes if you file your return. The following actions can land you in jail for one to five years:

• Tax Evasion: Any action taken to evade the assessment of a tax, such as filing a fraudulent return, can land you in prison for 5 years.
• Failure to File a Return: Failing to file a return can land you in jail for one year, for each year you didn't file.
• Helping Someone Evade Taxes: Helping someone else get out of paying their taxes can result in imprisonment for up to 5 years, depending on the situation.

Statute of Limitations for Criminal Charges

If the government is going to file criminal charges against you for failing to pay your taxes, there is a limited time to file charges. Depending on the exact nature of the alleged wrongdoing, criminal charges are generally filed within 6 years of the violation.

The IRS also has a time limit on collections. In general, the IRS will not take collection action after 10 years from the date of the assessment. If you filed a return 10-years ago but never paid the associated taxes, you will not be criminally charged and the IRS will not try and collect on the unpaid taxes.

Can't Pay? Consider a Payment Plan

If you owe more in taxes than you can afford to pay, you have better options than simply not paying.

• Individual Installment Agreement: You can set up a plan that allows you to pay down your back taxes over time, with regular monthly payments. You'll need to provide the IRS with detailed information on your assets, such as real estate and investment accounts, as well as household expenses.
• Offer In Compromise: This is an agreement between you and the IRS to settle your tax liability for less than the full amount owed. It's generally not an option when the IRS thinks you are able to pay down your debt through a payment plan. This determination is based on your “reasonable collection potential."

Get Legal Help with Tax Questions

Failing to comply with IRS or state taxation rules can result in serious civil and criminal penalties. And the longer your taxes go unpaid, the more serious the situation becomes. It's a good idea to contact an experienced tax lawyer who can advise you on how best to proceed in resolving your situation.