FAQs: Criminal Penalties for Tax Fraud & Tax Evasion

Are there criminal penalties for tax offenses and can I go to jail for not paying my taxes?

The short answer is yes. Tax Code Sections 7201 through 7207 define what a tax crime is and how the government may go about prosecuting such crimes. What distinguishes a civil tax offense from a criminal one is the element of "bad intent" or "willfulness". You may have neglected to include an item of income on your tax return through oversight. This omission will subject you to a civil tax penalty. Or, you may have intentionally underdeclared your income. If the IRS can prove such willfulness, you will be held criminally responsible for such an offense. "Willfulness" is defined as "a voluntary, intentional violation of known legal duty." Tax Code Section 7201 states that "any person who willfully attempts in any manner to evade or defeat any tax imposed by" the Tax Code is guilty of a felony or a tax crime.

Examples of criminal tax evasion are filing a fraudulent tax return, keeping a double set of books with an intention to mislead the government about the personal or business income, making false invoices or receipts, intentionally destroying tax records in order to hinder tax collection efforts and concealing assets from the government.

Under Tax Code Section 7206(1), a person who willfully signs a tax return which he or she does not believe to be true and correct may be subjected to criminal sanctions. The maximum punishment for such a false return is three years imprisonment and a fine of $100,000 for individuals or $500,000 for corporations.

Failure to file a tax return is also a criminal offense if the element of willfulness is present. The maximum sentence for this tax crime is one year of imprisonment and a fine of $25,000 for individuals and $100,000 for organizations.

Under Tax Code Section 7207, if a taxpayer fraudulently alters documents, such as invoices and checks and then submits them to the IRS as supporting documentation for a tax return, he or she has committed a tax crime punishable by one year of imprisonment and up to $10,000 fine for individuals and $50,000 for organizations.

In addition to the Tax Code, criminal punishments are provided for tax crimes under the Criminal Code. Thus, filing a fraudulent tax return is punishable not only under the Tax Code, but is also a criminal offense under Section 1001 of the Criminal Code. The punishment for false statements to the government is five years in jail and up to $500,000 in penalty.

A false tax refund claim will subject a taxpayer to the punishments contemplated by the Criminal Code Title 18, Section 287. The punishment is the same as that of filing a fraudulent tax return.

Imposition of criminal tax penalties can entail severe consequences. An experienced tax attorney can help you by preventing the assessment of such penalties against you or by minimizing their effects.

Kamyar Mehdiyoun is an IRS & tax attorney who assists clients with tax evasion, tax fraud & tax crime issues, criminal tax conviction, unfiled tax returns, criminal tax penalties, delinquent returns, tax underpayments, criminal tax violations, IRS collections, criminal tax litigation and delinquent tax liabilities. If you need an IRS & tax lawyer, contact Kamyar Mehdiyoun’s tax law firm located in Rockville, Maryland and serving Maryland (MD), Virginia (VA) and Washington, DC metro area as well as the rest of the U.S.