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Can You Go to Jail For Not Paying Taxes?

Taxes are one of the most important aspects of life. They help to fund government programs and services that we rely on, and they help to ensure that everyone pays their fair share. In this article, we’ll look at the penalties for not paying taxes and some controversy surrounding them.

What are the penalties for not paying taxes?      

The IRS has a penalty for failure to file when you fail to file your tax returns or ask for extensions before the tax deadline, usually April 15. The penalty is determined by the amount of taxes unpaid and how long it takes to submit your tax return.

The penalty for the IRS’s failure to file amounts to 5% of the tax bill each month when your tax return is due. But, it’s only 25% of taxes that are not paid.

What Is the Late Payment Penalty?    

 A different penalty is imposed if you don’t pay the total tax due on time. The liability for failure to pay is 0.5 percent of the unpaid tax for each month or portion of a month in which you fail to pay the tax invoice. 

As with the failure to file, the penalty for late payment is set at 25% of the tax debts that are not paid.

If both fail to file and the inability to pay penalties are present, The IRS reduces your penalty for not filing due to your inability to pay the penalty.

For example, suppose you owe federal tax but didn’t file your returns or settle the due tax amount. In the first month, instead of imposing the 5% failure to file penalty and the 0.5 per cent penalty for not paying in this case, the IRS will apply an additional 4.5 per cent late-filing penalty and the 0.5 per cent penalty for failing to pay the total of five %.

What If You Are Owed a Refund?    

If you’re due an income tax refund and you’re due a refund, the IRS will not charge you penalties for filing tax returns late. There are two great reasons to file your tax return as quickly as possible.

  • Reclaiming your tax refund. Filing your tax return late and you may lose your refund. The law gives you the time of three years to file a tax return to receive your tax refund. The three-year period begins with the due date for the return. For instance, your tax return for the year 2019 was due on July 15, 2021 (the Treasury Department gave taxpayers an extra three months to file the return that year because of the pandemic COVID-19). If you’ve not yet filed your tax return for the 2019 tax year, you’ll need up to July 17, 2023, to file your tax return and claim a refund. There are two additional days since July 15 is a Saturday in 2023. This means that the deadline changes to the next business day.
  • The clock is now ticking on the time limit. In general, the IRS can examine tax returns filed in the last three years. This is referred to by the term “statute of limitations. But, there are a few exceptions. If the IRS thinks you’ve grossly overstated your earnings by 25% or more, it can extend the tax by an added three years to file. The clock begins to run when you file your tax return. If you filed your 2019 tax return on July 1, 2022, the IRS would have up to July 1, 2025, to review your tax return or on July 1, 2028, when you’ve grossly understated your earnings. If you put off filing, the clock doesn’t start, and the IRS may decide to examine you five, 10 or fifteen years from now.

How many years can you go without filing taxes?      

You may have thought that you didn’t need to file taxes since you didn’t earn enough or lived in a foreign country. But, the majority of people with incomes over the amount of a certain amount have to file taxes. If it’s been years since you haven’t filed or paid taxes, you’re still in the position of having to pay back taxes. It is also possible to claim refunds that were due for previous years.

Failure to File Taxes?    

If you do not complete your tax returns by the deadline, you could be subject to additional penalties and interest beginning from the day your tax returns were due. Failure to file tax returns or pay taxes may be considered a crime. 

The IRS is aware of a range of offences that involve evading tax assessment and tax payment. In the Code of Internal Revenue, SS 7201, anyone who knowingly attempts to avoid taxation can be punished with five years of prison and fines of $250,000.

For most tax evasion offences, there is a period of time to bring the criminal case against you. If the IRS is looking to go after tax evasion and similar charges, it has to complete the investigation within six years. Generally, this begins from the date when the tax return that was not filed was due.

Some people may fall into debt without realizing it. Maybe there was a death within the family, or you were diagnosed with an illness of a serious nature. No matter the cause, it’s tempting to let go if you’ve not filed your taxes for a few years. If you don’t file your taxes for a period of 10 years or more could result in severe penalties and a potential sentence in prison.

There’s No Time Limit on the Collection of Taxes    

If you have long-standing tax returns that you haven’t filed, It could be tempting to think you are safe because the IRS or the state tax agency has lost track of the tax return you filed. But, you could still be in the tax bind even if it’s been a decade or more.

The general rule is that there is a 10-year period for tax, penalty and interest for every year that you do not submit tax returns. If you fail to file taxes the time limit for collections doesn’t start until the IRS decides to make a deficiency determination. Tax agencies in the state are subject to their own rules, and many have longer than enough time for collecting. For instance, California can collect state taxes for up to 20 years following the assessment date.

Can you go to Jail for not Paying State Taxes?      

The IRS will not file taxpayers with criminal convictions simply because they do not have funds to pay. This is a fact. If you pay your taxes in error, the penalties are more severe than if you pay taxes on time. But, the following behaviours can land you in prison:

  • Tax evasion: This occurs the case when taxpayers engage in activities such as filing fraudulent tax returns. Anyone involved in this behaviour could face as long as five years in jail.
  • Inability to submit a tax return: In the event of not filing a tax return, it could result in one year in prison for each year you fail to complete the tax return.
  • Aiding someone in evading tax: If you aid others to avoid paying their tax obligations, you could face a five-year prison sentence, based on the type of accusation.

FAQs

How long does it take to investigate tax evasion?  

Usually, tax fraud or tax evasion investigations will require 1000-2000 staff hours, and these investigations typically last from one year to two years. Furthermore, it is contingent on the magnitude and scale of tax evasion which is taking place.

How long can you get away with not paying taxes?      

There is usually a 10-year period for collecting taxes, penalties and interest for every year you do not submit tax returns. If you do not file tax returns in the time frame of limitation, the time period for collections doesn’t begin until the IRS determines that you are in deficiency.

Can you go to jail for not paying taxes in the UK?      

Tax evasion could result in severe fines, and the highest penalty for tax fraud in the UK can be as high as prison time. The punishment and the typical tax evasion penalty can differ among different countries. Here are some instances of the penalties which could be assessed:

  • Tax evasion penalties for income tax for summary convictions are six months in prison or a fine as high as PS5,000. Maximum penalties for tax avoidance for tax evasion in the UK is seven years in prison or an unlimited fine.
  • In the case of VAT fraud, the maximum penalty in the magistrate’s courts is six months in prison or a fine amounting to PS20,000. Crown Court cases can carry up to seven years ‘ imprisonment or an unlimited fine.
  • The act of stealing public revenue: Due to the seriousness this crime is a serious offence, and the most severe punishment for fraud against revenues from the public in the UK is life imprisonment or an unlimited fine.
  • The provision of false documents to HMRC or in a magistrate’s court or as an appeal, HMRC taxes for tax evasion could be as severe as a fine of as high as PS20,000 to up to six months in jail.
  • The violation of the law (smuggling) If you are convicted of a summary conviction, the maximal UK punishment is acceptable, which can be upwards of PS20,000. Crown Court cases could result in up to 7 years of prison or an unlimited fine.

Conclusion

Be aware of the potential consequences of not paying taxes and take steps to ensure that you comply with any tax laws that apply to you.

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