Will I Go to Jail if I Don’t File a Tax Return?

The IRS understands that any of us can make a mistake. If you don’t file your tax return by the deadline, the IRS will not automatically assume that you are a tax evader. But if you fail to file your return for several years, you may find yourself dealing with the Internal Revenue Service Criminal Investigation Division – something you probably don’t want to do.

By failing to file a tax return, the following may happen:

• The IRS may file your return for you: if the IRS files a Substitute for Return, it will be prepared in the best interest of the Treasury, not you. This means you won’t be given the tax benefits of a Married Filing Joint return (if you qualify) and you won’t be getting credit for anything beyond the standard deduction.
• You may be charged a Failure to File penalty: the IRS can add a 5% penalty for each month, and portion of a month, that your return is late, based on the balance due. This can total up to 25% of the balance due if you don’t file your return.
• You may miss a refund due: the IRS only has to issue refunds for the past three years. If you file a return and are due a refund, but file the return more than three years after the due date, your money is gone.
• You don’t get credit for Social Security: if you are self-employed, the Social Security Administration calculates your benefits based on the self-employment tax you report on Form 1040. If you fail to file a tax return, the Social Security Administration has no way to give you credit.

Going to jail is not one of the possibilities listed above because the IRS usually does not recommend criminal prosecution for failing to file a tax return IF the individual voluntarily files, or makes arrangements to file, the missing tax return(s). If you miss the deadline and file your return(s) late, you may have to pay some or all of the penalties listed above, but the IRS will not come knocking on your door.

Individuals who repeatedly fail to file their required tax returns, or pay their tax liability, will be paid a visit by a Special Agent of the CI division. In the most extreme cases, CI will then refer the case to the United States Attorney’s office.

If you do make it to the CI division, your chances of getting off without jail time aren’t so good. .. in 2010, 84.4% of the individuals that the Criminal Investigation Division has recommended for prosecution were sentenced to prison. The average prison term for those individuals is a little over four years – a long time to think about whether or not failing to comply with the IRS is really worth it.