Punishable by steep fines and jail time, tax evasion has serious consequences. Understanding the difference between tax evasion and making errors when filing helps give you a better idea of who might face prison time.
While the IRS does not pursue every situation of taxes not adding up, situations in which money has been purposefully concealed often lead to audits and criminal charges for fraudulent behavior.
What is tax evasion?
Tax evasion is more than just making a mistake when filing taxes. Put simply, tax evasion is deliberately hiding earnings by not reporting them. An example would be having a second job or side gig and leaving it off of your reported earnings in an attempt to avoid having to pay more in taxes. Failing to file a tax return or understating what you owe are likely ways to get in trouble with the IRS and face subsequent jail time.
Not being able to pay your taxes does not necessarily equate to tax evasion. As long as you attempt to file your taxes correctly and communicate with the IRS, getting pursued for tax evasion remains unlikely. The IRS offers resources and payment plans for those who can not afford their taxes.
When does tax evasion lead to prison time?
If the IRS suspects you of tax evasion, they will perform an audit to investigate you for fraudulent behavior. Tax evasion often results in prison and steep fines when the IRS proves you purposefully attempted to avoid paying taxes. While sentencing varies from case to case, it is possible to end up in prison for multiple years after receiving charges of tax evasion.