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Tax Evasion Penalties and Other Consequences

Disclaimer: This article should not be treated as legal advice. It’s recommended that readers still consult legal counsel and contact a lawyer should they have any concerns regarding tax evasion.

Part of what it means to be a citizen is to pay taxes, as these allow us to help the government gain the necessary funding in order to help its projects be successful in the pursuit of public service. Taxes pave way to government funding, which in turn paves way to a lot of perks and programs that help us have fruitful lives where we live.

Of course, this also means taxes are part of our obligations. These come in many forms, such as taxes on services and things we buy, or a deduction in our paychecks. Annual tax reports must be submitted as well in order to prove that all our accounts and balances are in check, lest we risk tax evasion, its penalties and other consequences. If you want to be familiar with the nature of tax evasion and its various implications, do read along.

The Dangers of Not Filing Taxes

Not filing your tax returns on time can actually pose serious consequences and potential penalties on your end, which can go beyond getting interest. It may be important for you to learn what these consequences are in order to fully understand the importance of being able to file your returns when needed.

We do however recommend that it's best if you consult a lawyer and a financial professional should you have any concerns regarding the implications of not being able to do your taxes properly. The consequences and penalties to be elaborated upon below depend on the degree and the severity of the conditions involved, and specific situations can make changes to these penalties.

Here are some tax evasion penalties and other consequences you should be aware of.

Penalties, Interest

If you are found guilty of acting because you want to avoid paying taxes to the IRS, you can actually have fines of up to $250,000. The fines can still apply even if you're not charged with a tax evasion case especially if you file your tax returns two months or 60 days after the date it is due.

  • This might be the reason why it's recommended you file your tax return, regardless if you can or can't pay in full, because the documentation also matters.
  • Another reason why paying on time counts is because the IRS is obligated by law to actually add interest charges if you don't pay on time. This starts adding up if you don't pay on the due date regardless of your extension until you pay what you owe to its fullest. When we say "full payment," this now includes all penalty charges and interest rates, the latter of which can actually change quarterly.
  • Of course, failing to pay the IRS on time can make your credit suffer, and a low credit rating may not be helpful if you want a loan.

The other set of penalties related to tax evasion don't necessarily immediately relate to money.

  • Sometimes, your properties and benefits can be at risk as well. For instance, if you do owe money to the IRS, there's a chance that 15-percent of your benefits from Social Security will be taken monthly until you are able to pay in full.
  • Your property may also receive a federal tax lien, which can be used as a legal claim to your property. This is automatically given to your property when you don't pay your amount due 10 days after a tax assessment has been made. There will be a notice that states a demand for payment and the taxes owed. The IRS can also file a Notice of Federal Tax Lien that will be placed in public records, which then informs creditors that the IRS now has a claim to all sorts of properties you own.
  • This means that there's an opportunity that a levy to your property will also be given. The IRS has an opportunity to levy or seize your property if this helps you pay your debt.
  • Your passport may not be renewed if the IRS tells the Department of State that you haven't been paying your tax debts appropriately.

Criminal Charges, Potential Sentence

Sometimes, penalties can get severe enough that you may find yourself facing criminal charges. If you've been found guilty of committing tax evasion, you can actually go to prison for as much as five years. This is because tax evasion is a felony, which means the United States Attorney's Office can actually prosecute you in the federal court.

If you want to read more on specific potential penalties for tax evasion, here's a list from the IRS.

Conclusion

The penalties and consequences of tax evasion as seen above can depend on a variety of conditions and situations. This means it's important that we get a basic understanding of how our taxes work and understand how important they are when it comes to our responsibilities as a citizen. Much of the benefits we have now as citizens are all thanks to the taxes we give the government, as these are responsible for a lot of services that we are receiving today.

If you look at your reports and see some discrepancies, we recommend you ask your legal counsel on the best approach on having these information corrected.

As you may have read above, tax evasion penalties and other consequences are different based on a variety of factors. It's important to have a basic idea of how these factors work and how you can avoid these situations, as it can get tricky to pay back taxes when cases like these are put into consideration. Should you have things to clarify, it's best to consult a lawyer, a legal professional, and a financial professional on the matter. These laws can change depending on where you live, and on the specifics of your situation.

Anne McGee

Anne McGee has over 20 years of experience writing about law subjects where she hopes her knowledge can help the common reader understand law topics that may be of relevance to their daily lives. If she's not reading a good book, then chances are Anne is jogging during her free time.

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