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Believe it or not, lots of people worry about the possible consequences of not paying taxes, and this regularly happens because people forget to pay them on time. Most of them think about the possibility of going to jail due to a couple of months of unpaid taxes, but let me assure you that going to jail for not paying taxes is pretty rare, and shouldn’t be a source of concern.
Still, the IRS, also known as the Internal Revenue Service, can place some penalties depending on the faults you may have committed and your circumstances. Even so, it’s not like you can’t go to jail, it’s just that the IRS saves that penalty for the most extreme case-scenarios, like the crime of evading taxes and fraud.
If you evaded taxes unwillingly (like most cases) because you forgot or you didn’t have the money at the time, chances are you are most likely not going to jail. But, if you avoid taxes voluntarily, the story may differ. Tax evasion is considered a federal crime that can put you in prison for five years for each offense. Likewise, you can get arrested if you help someone evade paying taxes, even if they didn’t belong to you.
You can read more about it here: https://en.wikipedia.org/wiki/Internal_Revenue_Service.
The first thing you have to know is that there are two main types of sentences, the one you receive for not filing your taxes and the one for not paying them.
If you fail to file your taxes, you’ll have to deal with a failure-to-file penalty. The penalty consists of a five percent fee added to your unpaid taxes for each month you didn’t file up to 25 percent. If for some reason, you failed to file your taxes for 60 days or more, you’ll have to pay a minimum of $135 or 100 percent of what you owe (Depending on which one is lower)
If you did file your taxes but didn’t pay them, you’ll have to deal with a failure-to-pay penalty. This one is 0.5 percent of your unpaid taxes for each month, up to 25 percent. Also, you’ll have to pay interest for the amount.
The IRS prefers to use these penalties to encourage people to file and pay their taxes, instead of penalizing them with jail, since it’s more effective to make people do things right than keeping them in jail unable to pay their debts.
Things That Can Get You in Jail
As you may have guessed already, not filing your taxes is worse than not paying them. The penalties for not filing your taxes are considerably more imposing than the ones for not paying them. You won’t get in jail if you don’t have money to pay taxes you’ve already filed, so take this in mind: the IRS is much more lenient towards people who file their taxes.
Tax fraud and tax evasion consist in not filing the right information to avoid paying the correct amount of taxes. It means omitting or misrepresenting data sheets, and even withholding crucial information that could unquestionably make a business or organization pay more taxes.
Some things that could potentially put you in jail for 1 to 5 years include:
- Purposely failing to file the income tax return.
- False claims in tax deductions and tax credits
- Intentionally avoiding payment of tax debt
- Preparation and filing of a false return
- Deliberately not reporting all income received
- Helping someone commit tax fraud or tax evasion.
Usually, a business that engages in tax evasion/tax fraud would:
- Fail to payroll tax reports on purpose
- Fail to report payments made in cash to employees
- Miss to inform and pay withheld payroll taxes
If you are truly concerned about this matter, I recommend you research your circumstances to get a better picture of your situation.
Just in Case You End Up in Jail
Let’s say you end up in jail because you didn’t pay your taxes. Maybe you omitted a particular source of income to your accountant, you hid information or made false claims during a court. Whatever the case is, now you are jailed and don’t know what to do. If possible, you should opt for bailing until you are summoned to court again.
In case you didn’t know, you may get restricted during a judicial process. You can opt to bail (a conditional release) with the promise to show up in court if you are required. Bail usually implies a bail bond, which is money or property you provide until the judicial process finishes in return for the release from pre-trial detention. The bail returns to the owner once the trial has concluded.
You can also hire a bail bondsman, which is a person or an agency that acts as a guarantee and pledges money or property as bail for you. Agents and agencies generally charge ten to fifteen percent of the bond and a minimum of $100 as compensation for their services. This fee is usually non-refundable. Here’s more information about it.
Bits of Advice
The best thing you can do all together is to prepare yourself. Make a monthly budget on your expenses and save money for your taxes to avoid dealing with tax penalties. Prepare a list to do during a couple of days, with alarms and everything, to remember yourself to pay for your taxes. If you feel like you don’t have enough money to pay for time, take notes so you’ll remember and file them, this way, you’ll skip having to pay a more prominent penalty.
And of course, my best advice is not to engage in tax fraud or tax evasion, since they are probably the only reason you could go to jail because of unpaid taxes.
You can always do your research and prepare yourself, looking for the most common ways to pay taxes, which taxes you have to pay, why, and when. You can always ask a co-worker, a family member or a friend for more information to prepare a monthly plan to deal with your taxes.