Penalties for Not Paying Your Taxes

In general, the term “tax evasion” is used in a criminal context and requires the government to prove that you intentionally did not pay taxes that you owed, or if you helped someone else to evade paying their taxes. Tax fraud is a broader term which also includes failure to pay the amount of taxes owed and includes civil matters which can result in fines and monetary penalties. For civil tax fraud, the government is not required to prove intent – they must just show that there was an underpayment of taxes.

The severity of the penalty depends upon circumstances surrounding the offense, whether you truly do not have the ability pay, you have a reasonable excuse for not paying, or whether you illegally or intentionally avoided paying your taxes, as opposed to simply miscalculating or making a mistake. 

Under the internal revenue code, tax evasion is a felony. If you are found guilty of tax evasion, you can be sentenced to prison for up to five years and/or receive a fine of up to $250,000 for an individual or $500,000 for a corporation. The same is true if you are an employer and are found to have intentionally failed to either collect tax from your employee(s) or failed to pay the tax collected over to the government. 

You can also be charged for making false statements, including willfully filing a false tax return, which is also considered a felony. Aiding, assisting in or advising another in preparing or presenting a fraudulent tax return or affidavit, whether the person actually filing the return or affidavit is aware of the fraud or not is also a felony. Each of these offenses can carry a prison term of up to three years and fines similar to those for tax evasion.

Intentionally failing to file a return, refusing to give required information to the IRS, or to pay taxes due are misdemeanors and can carry a prison term of up to one year for each year you failed to pay or to file a return, and a fine of up to $100,000 for individuals or $200,000 for corporations.

For those considered to be “seriously delinquent” taxpayers (who owe over $51,000 in taxes, including both penalties and interest) the IRS can revoke your passport or refuse to issue or renew it. The IRS must first file “Notice of Federal Tax Lien” or a “Notice of Levy” and you then have an opportunity to pay your taxes within 10 days after the notice is given to avoid having your passport revoked. 

Even if a penalty has been assessed against you, you may be able to obtain relief in the form of a penalty abatement. The IRS has a first-time penalty abatement program that you may qualify for if you have no prior tax penalties for the past three years, you filed all required returns, and have paid or made arrangements to pay any tax due. 

You can also get an abatement if you have a reasonable excuse for not paying your taxes or filing a return, such as when you or a close family member has suffered a serious illness or were a victim of a fire or natural disaster that prevented you from obtaining records or filing timely. Finally, you can qualify for a penalty abatement if you received incorrect written advice from the IRS.

Penalty abatements are usually only granted if you have a history of compliance with the tax laws and have filed and paid your taxes timely in the past, but each circumstance is considered separately. 

If you have a tax problem or would like to request a penalty abatement from the IRS, it would be wise to contact a tax lawyer with experience dealing with the IRS who can help you to file your request and to ensure that the IRS considers all of the relevant circumstances that may have contributed to your failure to file or to pay your taxes on time. Use our site to find a qualified tax attorney who can help you.