Summary

Individuals who intentionally evade taxes can face criminal charges and potentially go to jail. Tax fraud and tax evasion are felonies, with penalties including fines and imprisonment. Nearly two-thirds of people convicted of tax fraud receive prison sentences, averaging 16 months. The IRS Voluntary Disclosure Program allows taxpayers to file back taxes and avoid prosecution if they voluntarily disclose their failure to file and make an honest attempt to pay. Tax authorities are often willing to negotiate payment solutions, such as installment plans or offers-in-compromise, for those who cannot pay the full amount of taxes owed.

The Basics

The short answer to the question of whether you can go to jail for not paying taxes is “yes.” Whether a person would actually go to jail for not paying their taxes depends upon all the details of their individual tax circumstances. Sometimes people make errors on their tax returns or are negligent in filing, but they are not intentionally trying to avoid paying taxes.

It is a long-standing policy of the Internal Revenue Service (IRS) not to pursue prosecution of individuals who fail to file their tax returns if these individuals voluntarily take steps to file and make an honest attempt to pay. However, if a person acts intentionally to evade taxes, they could be charged with the crime of tax fraud or tax evasion and be prosecuted. Tax fraud may be a misdemeanor or a felony crime, depending upon the specific charge. Tax evasion is a felony. The penalties for felony tax fraud or evasion are serious.

Can You Go to Prison for Not Paying Taxes? Penalties for Tax Evasion Include Time Behind Bars

Under IRS Section 7201, “Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall … be guilty of a felony and, upon conviction thereof, 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.”

The government is not shy about ordering prison time for people found guilty of felony tax fraud or evasion. Statistics from the United States Sentencing Commission show that nearly two-thirds of people convicted of tax fraud are sentenced to prison time, with an average sentence of 16 months. State tax agencies, including in New York State, also take it seriously when people intentionally seek to avoid paying taxes, and sentences for state tax fraud and evasion can also result in jail time. And in addition to criminal penalties such as jail time and criminal fines, you face liens and levies and other consequences if you don’t pay your taxes.

Can You Go to Jail for Not Filing Taxes?

As you can see, you could go to jail for not filing and paying your taxes. Why would people take the chance? Sometimes people don’t file because they know they don’t have the money to pay, so they put it off. They think that maybe they’ll have the money later and then they’ll file, or even believe that the IRS or state won’t notice. But what happens is that penalties and interest add up, the taxpayer doesn’t have the money, and it turns into a vicious cycle of not filing returns and paying back taxes. Before you know it, you are deep in a hole of back tax debt, which the IRS does notice. Don’t fall into this trap. It’s just too risky and not worth the potential problems you will have to deal with when the IRS does come calling. While it may feel like your tax situation is hopeless, there are possible solutions if you take the steps to voluntarily file your taxes and make an honest effort to pay your debt.

Can You Go to Jail for Not Paying Business Taxes?

As with individual taxes, you can go to jail for not paying business taxes if you are charged with tax fraud or evasion, are prosecuted and convicted. Tax authorities do not want to put people in jail, but they do want to collect taxes owed. It is always in a business owner’s or individual taxpayer’s best interests to communicate with the IRS or state tax agency to try to negotiate a solution. It starts with filing unfiled returns, even if you don’t have the money to pay the tax debt owed. Doing so may help you avoid a criminal investigation that could lead to criminal charges and possibly going to jail.

Can You Go to Jail for a Tax Warrant?

No. A tax warrant is a lien against your assets. It is not a warrant for your arrest. In New York, the DTF issues tax warrants to people with unpaid taxes, and the warrants give the state the right to garnish your wages, take your real or personal property, and seize your bank account or other assets.

IRS Voluntary Disclosure Program for Unfiled Back Taxes

The IRS has a “voluntary disclosure” program that allows taxpayers to file back taxes and avoid prosecution. State tax agencies have similar programs. The IRS policy applies to taxpayers who:

• Voluntarily inform the IRS of their failure to file and pay for one or more years
• Voluntarily Inform the IRS before they find out they are under criminal investigation
• File accurate back tax returns
• Pay the full amount of taxes owed or, if unable to do so, work out an payment plan agreement to pay over a period of time or negotiate a settlement to pay less than the full amount owed.

Options for Resolving Back Tax Debt

Many people believe that the IRS will not negotiate tax relief solutions. This isn’t true. Tax authorities are often willing to negotiate as long as the taxpayer is honest and forthright. If you cannot pay the full amount of taxes you owe at once, you may be eligible for one of the following payment solutions:

• Installment plan: With an installment plan, you pay taxes owed over time.
• Offer-in-compromise: An offer-in-compromise is a settlement in which the IRS agrees to accept less than the full amount of taxes owed.

In cases of proven financial hardship, taxpayers may qualify for currently-not-collectible status and the IRS will stop all collection activities. However, penalties and interest continue to add up, and if a taxpayer’s financial situation changes, they will still owe back taxes.

Do You Have Unpaid Taxes? Get Help from Experienced Tax Attorney Timothy S. Hart.

If you have unfiled and unpaid federal or New York State back taxes, reach out to our NYC and Albany tax attorney today to arrange a free consultation and find a solution that is right for you. Timothy S. Hart is an experienced tax lawyer and Certified Public Accountant who has helped hundreds of taxpayers negotiate payment solutions with tax agencies. He is licensed to address IRS tax issues nationwide, so can assist you no matter where you live. In most situations, the problems incurred from failing to file tax returns and pay past-due taxes can be resolved satisfactorily, if addressed in a voluntary and timely manner. Call our office in NYC at (917) 382-5142, or in Albany at (518) 213-3445 for help.