Can You Go to Jail for Not Paying Taxes?

Turbo Takeaways

If you fail to file your taxes or pay them on time, you may be subject to penalties from the Internal Revenue Service (IRS).
Unpaid tax debt may result in property seizure, liens, and wage garnishment.
Taxpayers won’t face jail time for unpaid tax debt unless they commit fraud.

Will You Go To Jail for Unpaid Taxes?

You won’t go to jail simply for owing tax debt. Jail time is possible, though, for taxpayers who evade taxes or commit tax fraud. Furthermore, you could face jail time if you conceal income and assets or if you intentionally commit tax violations.

The IRS doesn’t pursue cases for people who can’t afford to pay taxes. Generally, those with low incomes fall into a low or no-tax bracket. If you're facing financial hardship, contact the IRS to work out a plan with the Taxpayer Advocate Service.

What Really Happens When You Don’t Pay Your Taxes?

It's not a good idea to skip paying taxes that you owe. Sometimes people make a mistake on their tax forms or forget to pay the IRS. In other cases, taxpayers intentionally avoid taxes. Regardless of the reasons, not paying taxes can result in penalties of varying degrees.

If you fail to file your taxes, you may be subject to a "Failure to File" fee. You may even have to pay a "Failure to Pay" fee if you pay your taxes late. If your tax bill accumulates, the IRS can seize your property and assets or take money from your paycheck through wage garnishment.

When the IRS suspects tax fraud or tax evasion, it may pursue criminal tax charges that result in jail time in extreme cases.

What Are the Legal Penalties For Not Paying Your Taxes?

When you fail to pay your taxes, the IRS may charge you legal penalties and fines. Here’s what you can expect when you don’t pay taxes:

If you do not file taxes before the due date, the IRS will charge a "Failure to File" penalty. This fee is 5% of unpaid taxes for every month your tax return is late and is capped at 25% of the unpaid taxes.
If you don’t pay your taxes before the due date, the IRS can charge a "Failure to Pay" penalty, which is 0.5% of the unpaid taxes for each month you don’t pay your taxes. The penalty is capped at 25% of unpaid taxes.
If you still don’t pay your taxes, the IRS may start a tax lien against you. This can take the form of wage garnishment, seizure of assets and bank accounts, and the sale of your property to recover the money.
In extreme cases, the IRS may file criminal charges for tax evasion. Deliberately trying to avoid paying the taxes you owe can lead to 3-5 years of jail time.

What Tax Issues Could Send You to Jail?

In most cases, taxpayers don't face jail time for not paying taxes. Criminal prosecution is reserved for tax fraud and tax evasion charges, which are serious crimes. Here’s a deeper look at the circumstances under which you may go to jail:

Intentionally not paying taxes you owe
Knowingly filing a false return
Intentionally and knowingly deceiving the IRS to avoid having your taxes assessed (tax evasion)
Falsifying documents or providing false statements
Underreporting income
Concealing assets or money
Maintaining a history of not filing taxes
Ignoring IRS notices and not cooperating with IRS employees
Helping others evade taxes

Tax Issues You Won't Go To Jail For

There are several lesser tax law violations for which you may have to pay penalties, but you won’t go to jail, including:

Tax filing mistakes due to negligence
Not having enough money to pay your taxes
Not filing taxes when you aren’t required to
Using legal strategies with the help of a CPA to minimize the amount of tax you need to pay (tax avoidance is legal, tax evasion is not)

Civil vs Criminal Penalties

Most tax liability issues are not criminal in nature. For example, if you made an honest mistake when filing your taxes, or if the IRS audited you and found out that you owe money, there may be a civil judgment against you.

You cannot go to jail for civil charges. Civil tax penalties are less severe compared to criminal penalties, but you may still have to pay up to $75,000.

If the federal government convicts you for tax evasion or tax fraud, it may impose criminal penalties, which can be quite severe. You may be required to pay $100,000 in fines and face a prison sentence of up to five years. If there has been a criminal investigation against you, consult with a tax attorney for help.

It's important to consult a tax professional if you’re dealing with tax issues. These professionals possess a deep understanding of the tax code and can provide valuable assistance.

How To Avoid Tax Penalties

While the IRS only pursues criminal charges in extreme cases, it’s best to learn what you can do to avoid fines, penalties, and criminal prosecution. Follow these tips to avoid owing more to the IRS:

6 Tips To Avoid Tax Penalties
1. Always file tax returns on time.
2. Pay any taxes you owe before the due date.
3. Comply with state and federal tax laws.
4. Provide accurate information to the IRS.
5. Seek professional help if you have questions or can't afford to pay your taxes.
6. Explore options like tax debt settlement, installment agreements, or penalty relief.

What To Do If You Can’t Pay Taxes

“If you get behind or owe more than you thought on your taxes, don't put off talking to the IRS,” cautions Teresa Dodson, debt expert and founder of Greenbacks Consulting. “They are very easy to work with in setting up a payment plan that works for you,” Dodson adds.

Here are a few of the options you can explore if you owe money on your taxes:

Debt Relief

Use debt consolidation loans to combine all of your debts, including tax debt, into a single monthly payment. If you have a good credit score, you can get a loan at a low-interest rate. Use the proceeds from the loan to pay off your tax obligations.

You can also negotiate to reduce your debt and free up money that you can use to pay the taxes you owe.

Offer In Compromise

You can settle your tax debt for less than you owe through an Offer in Compromise. This option is usually available only to taxpayers facing financial hardship. The qualification criteria can be strict, and you’ll need to provide detailed information about your finances to the IRS.

Installment Agreement

If you can’t afford to pay off your entire tax debt at once, check to see if you can set up an IRS installment plan. This plan allows you to make monthly installments until you pay off your debt in full. You’ll still have to pay interest and "Failure to Pay" penalties while on the payment plan, but the IRS will reduce the penalty to 0.25% of the outstanding balance.

The Truth About Tax Debt and Jail Time

The IRS will only pursue criminal charges and send you to jail if you are intentionally committing tax fraud. As long as you are proactive and are trying to pay off your back taxes retroactively, along with your fines, you shouldn’t have to worry about going to jail.

If you get behind or owe more than you thought on your taxes, don't put off talking to the IRS. They are very easy to work with in setting up a payment plan that works for you.- Teresa Dodson

Paying your taxes on time is important, but if you’ve made an unintentional mistake or can't afford to pay taxes, there are several ways to rectify it. Consult with a tax attorney if you’re dealing with tax problems.

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