More than 2 million people are currently behind bars in the United States for crimes ranging from nonviolent possession of marijuana to mass murder.
I’ve talked before about how the US has about 5% of the world’s population, but a whopping 25% of the world’s prison population. Data suggest that this is largely due to a surge in incarceration over the past five decades of the war on drugs.
With numbers in the millions, it’s clear we don’t just send people to jail for drug use or murder. You can also be jailed for offenses such as battery, DUI, kidnapping, unpaid child support, and identity theft.
But what about paying taxes? As one of the two inevitability in life, taxation is something we have to deal with every day. Most states have taxes on everything bought, sold, earned, used or made, the largest percentage of which is income tax.
What are the consequences if you default on your taxes, don’t file when required, or lie about what you file? Can I go to jail for not paying taxes?
In today’s blog post, I will cover the following topics:
- Making Big Tax Mistakes Won’t Land You in Jail
- Fraud could land you in jail
- severe punishment
- Examples of Tax Cases That Ended in Jail
- Can you go to jail for not paying council tax?
Making Big Tax Mistakes Won’t Land You in Jail
according to HR block, many people are afraid of audits by the IRS. Apparently, people think that if they make big mistakes with their taxes, they’re going to end up in jail. Tax firms say fear of audits is one of the main reasons people file timely and accurate tax returns each year.
However, the reality is that very few taxpayers end up in jail for tax evasion. In 2015, the IRS prosecuted 1,330 of the 150 million taxpayers for lawful source tax evasion (as opposed to drugs or illegal activities).
The main targets of the IRS are those who underreport or underreport the taxes they owe. Tax evasion cases often start with taxpayers who fail to file tax returns as required, or who misreport income, credits and/or tax deductions.
The IRS generally doesn’t pursue people who can’t pay their taxes. However, if you’re hiding assets and income that should be used to pay your taxes, you could find yourself in some serious trouble.
Fraud could land you in jail
So, if making a tax mistake doesn’t lead to jail time, what exactly makes a taxpayer subject to criminal prosecution by the IRS? Typically, tax evasion cases of income from legitimate sources begin with an audit of tax returns filed by individuals.
If the IRS discovers during an audit that a taxpayer made a deliberate error, it could lead to prosecution. The erroneous amounts are usually large and last for several years, with the hallmarks of willful tax evasion.
The biggest problem that exposes taxpayers to criminal investigation is unreported income. Basically, it’s tax fraud. If you leave out specific transactions — such as the sale of a business or the income you earn from a side business — you’re likely to find yourself facing charges.
Dodgy behavior during audits can also be a red flag for IRS investigators. If you make false statements or deliberately hide your bank account records, these are considered “markers of fraud,” which the IRS says often indicate tax evasion.
Another way to land yourself in jail for not paying taxes is to not file a tax return at all. If you don’t pay taxes on the money you make, the government will find out. Just because you didn’t file a tax return, doesn’t mean the person paying you didn’t.
When you are a gig worker who receives a 1099-misc, the person who paid you will report this information to the IRS. The same goes for W2s or any other required tax filings when payments are made.
The IRS won’t go after many people for tax evasion, but if they do, the penalties can be severe if they are convicted. Not only did the court order the person to pay what was owed, plus fines, fees and interest, they could also impose a prison sentence of up to five years.
Examples of Tax Cases That Ended in Jail
Over the years, there have been some notable cases of tax fraud.A recent case includes jersey shore Star Mike “The Situation” Sorrentino. In 2018, Sorrentino pleaded guilty in New Jersey federal court to tax evasion charges.
“What the defendants admitted today, quite simply, was stealing money from their taxpayers,” U.S. Attorney Carpenito said. said in a press release“We are all required by law to pay our fair share of taxes. Celebrity status does not exempt us from that obligation.”
Sorrentino and his brother Mark were indicted in 2014 with tax offenses and conspiracy to defraud the United States for allegedly failing to properly pay taxes on $8.9 million in income between 2010 and 2012.
The reality star allegedly made multiple deposits of under $10,000 to different banks on the same day to evade government surveillance. He also listed luxury goods as a business expense.
Sorrentino was released after spending eight months in federal prison in Otisville, New York. In addition to the eight months in prison, Sorrentino received two years of supervised release, 500 hours of community service and a $10,000 fine.
Other notable tax evasion cases include the mobster Al Capone. Yes, he was sent to prison for tax evasion, not for smuggling, prostitution or murder. Actor Wesley Snipes was also fined for failing to pay his taxes.
Snipes allegedly hid income in offshore accounts and did not file federal income tax returns for years. The actor’s federal tax debt is estimated to be around $12 million.
The largest tax evasion case in U.S. history occurred in 2006, when telecommunications entrepreneur Walter C. Anderson pleaded guilty to two counts of tax evasion and one count of defrauding the District of Columbia. Anderson failed to report about $365 million in income on his 1998 and 1999 federal returns.
Anderson was sentenced to nine years in prison and ordered to pay $200 million in restitution. However, a typographical error in the federal judgment against Anderson prevented him from paying most of his back taxes.
The IRS finally recognized three years of taxes and penalties in Anderson’s case. However, he remains liable for $23 million owed to the DC government.
“This case sends a strong signal to anyone considering offshore tax avoidance. We have stepped up our efforts to pursue high-income tax evasion, whether it occurs in the United States or overseas.” IRS Commissioner Mark W. Everson.
Do you think people should go to jail for tax evasion? Let us know in the comments below.
Sources: Mass Incarceration: The Whole Pie 2020 Who goes to prison for tax evasion? Jersey Shore's Mike 'the Situation' Sorrentino Pleads Guilty in Tax Evasion Case 'Jersey Shore' star Mike Sorrentino freed from prison after tax-evasion conviction TELECOMMUNICATIONS ENTREPRENEUR WALTER C. ANDERSON PLEADS GUILTY IN $200 MILLION INCOME TAX EVASION CASE