When is Failure to File or Pay Taxes a Crime

There is no question about the fact that one can face criminal charges and spend time in federal prison for failure to file and/or pay taxes.  There is “equality of opportunity” when it comes to this area.  The IRS does not care if the violator is an individual, business man, politician, “famous person” or anyone else.  They will go after anyone they feel has violated the law.

 

However, the mere failure to file or pay does not, in itself, make one a criminal.  The IRS must allege and the Court must find that the failure to file or pay was done with the deliberate intent to defraud the government. This is usually pursued after the IRS learns of hidden assets, offshore bank accounts, a pattern of filing false tax returns claiming too many dependents, etc.  If one fails to file due to a nasty divorce, death in the family or other similar life-changing event, the IRS sees this as a mistake and not deliberate and will work with the taxpayer.  The IRS is willing to work with anyone who wants to put his past mistakes behind him and stay in compliance in the future.  Usually the taxpayer can submit an Offer In Compromise or an Installment Agreement.  In many cases, the IRS will also forgive the penalties that were charged in such a case.