Can You Go to Jail for Failing to Pay Taxes?

prison and not filing taxesFew us enjoy paying taxes, but it’s one of those things we’re required to do by law. And, since paying taxes is a matter of the law, there is the possibility of going to jail if you don’t pay your taxes.

Civil vs. Criminal Tax Proceedings

Few “regular” folks actually end up going to jail, though. Most ordinary taxpayers underpay due to a mistake or ignorance. Others have a hard time paying what they owe due to financial hardship (in such cases, it’s usually possible to work out a payment plan with the IRS). In many cases, the IRS simply initiates civil proceedings. An audit is performed to determine how much someone owes in back taxes, and then that amount is asked for. If you don’t pay or set up a payment plan, you might be subject to a lien or a levy. However, you won’t end up in jail if you don’t pay your taxes as assessed during a civil attempt to collect.

You only end up going to jail if you are prosecuted and sentenced in a criminal proceeding. With a criminal proceeding, the IRS has to prove that you planned to evade your tax responsibility. Very few people are prosecuted for tax evasion. The IRS reports that in Fiscal Year 2012, only 5,125 criminal investigations were launched -- that’s out of the millions of taxpayers. Only 2,466 people were sentenced as a result of those investigations, and 2,009 were incarcerated.

2012 Data on IRS Criminal Investigations 

irs criminal investigations 2012

 

Celebrities and Tax Evasion

While most taxpayers aren’t singled out for criminal prosecution, the IRS doesn’t mind making examples of celebrities that refuse to pay their taxes. In fact, the latest high profile tax evasion case is that of rapper Fat Joe, who was recently sentenced to four months in prison and a fine of $15,000. He’s expected to start serving his time in August. Lauryn Hill was also recently convicted of tax evasion and was sentenced to three months in prison as well.

But Fat Joe and Lauryn Hill are only the latest in a list of celebrities accused (and convicted) of tax evasion. Some of the other celebrities who have gone to jail for tax evasion include:

  • Sophia Loren, who was sentenced to 30 days in jail outside of Naples, Italy, for tax evasion (so it wasn’t for avoiding U.S. taxes). 
  • Wesley Snipes, who spent nearly three years in jail and finished his sentence on house arrest, owed about $7 million in taxes. He claimed he didn’t have to pay taxes. 
  • Rapper Ja Rule also got to finish his sentence on house arrest. His tax evasion conviction was paired with an illegal gun possession charge. 
  • Famous comedian Richard Pryor spent 10 days in jail for tax evasion in 1974.
  •  Musician Chuck Berry spent three months in jail for tax evasion.
  •  “Survivor” star Richard Hatch served a portion of his six-year prison sentence before being released. 
  • “Hollywood Madam” Heidi Fleiss was sentenced to seven years in prison, but only served a portion of it in jail.

Chances are that you won’t face criminal charges -- especially if you made an honest mistake. But if you ever become famous, watch out.

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