Will You Go to Jail for Not Paying Your Taxes?
Many people have a lot of anxiety regarding their taxes. Filing even the most basic income tax return can be incredibly confusing, and many people fear the repercussions of making a mistake. However, making an honest mistake on your taxes is unlikely to result in criminal charges or prison time. Similarly, you will not go to jail if you do not have enough money to pay your taxes. Instead, the IRS will work with you to establish a payment plan or, in some cases, negotiate a settlement based on your ability to pay.
So, what is prosecuted as a tax crime? Actions that violate federal tax laws may result in criminal charges. You may be assessed fines, given jail time, or both if convicted. You may also be required to pay prosecution costs.
What Is Tax Evasion?
The most common tax crime is tax evasion. As defined by 26 U.S. Code § 7201, tax evasion occurs when someone “willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof.” Tax evasion is a felony, and if found guilty, the convicted party “shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.”
Essentially, if you knowingly and intentionally fail to file a tax return or refuse to pay what is owed, you may be found guilty of tax evasion.
Famous Case of Tax Evasion
A well-known example of tax evasion is the case involving actor Nicolas Cage. In 2009, the federal government charged Nicolas Cage with tax evasion and placed liens totaling $14 million on the actor’s real estate holdings. This was due to taxes he owed from 2002 to 2004 and 2008. However, this case was far from cut and dry, and Cage claimed that the fault lay with his business manager, Samuel J. Levin, whom Cage sued and accused of mismanagement and fraud.
Cage promised to pay back the $14 million and, as of 2012, was already halfway there.
Other Types of Tax Fraud
Tax evasion is a type of tax fraud and is not the only tax crime that may result in criminal charges. In addition to the intentional avoidance of paying your taxes, tax fraud can include omitting information or misrepresentation of data to reduce your tax burden. Claiming false deductions, not reporting income, or using a false Social Security are all examples of tax fraud.
Other tax crimes include:
- Failure to file tax returns
- Failure to pay income tax
- Tax preparer fraud
- Employee tax fraud
- Helping someone else evade their taxes
- Claiming a nonexistent dependent
Tax fraud is not the same as tax avoidance. Tax avoidance uses legal loopholes to reduce the amount of taxes you owe, and though frowned upon, is legal.
What to Do If You Are Charged with a Tax Crime
Facing federal charges for a tax crime is scary. The IRS prosecutes tax fraud and related crimes aggressively, and penalties can be steep. The last thing you want is a federal felony conviction on your record. If you are facing charges of tax evasion or tax fraud, your first step should be to speak with an experienced criminal defense attorney, like ours at May, Rammell & Wells. We understand how complex these cases can be, and with our over 70 years of collective experience, we are prepared to help you today.
Send our law firm a message if you have been charged with a tax crime or believe you are under investigation.