Owing taxes is not a crime. However, it is a crime to fail to file tax returns as they become due. While no absolute assurance can be given to a taxpayer that criminal prosecution is not even the remotest possibility, experience shows that unless certain narrowly defined criteria for prosecution are met, criminally prosecution is highly unlikely.
The following criteria increase a non-filer's exposure to criminal prosecution:
- Tax protesters who are unrepentant and habitually refuse to file their tax returns in the face of contrary facts, case law, and primary authority provided by the taxing authorities.
- Those who are combative and completely refuse to cooperate with the IRS.
- High-profile persons who are known in their respective communities are at increased risk because the taxing authorities may wish to make an example of them so as to scare others in the non-filer's community into compliance.
On the bright side, even where the above criteria are met, the IRS Agents enforcing tax criminal laws are often rather selective, tending to pursue only the most egregious cases. However, to keep the public guessing, on occasion even average citizens who are not widely known in their respective communities, who are delinquent as to relatively small amounts, are occasionally criminally prosecuted.
While willful failure to file is punishable by up to one year in prison for each tax year, I have never had a client, or have heard of a client in my 18 years of experience, who was prosecuted or even to be threatened with it. Remember that it costs money to prosecute and incarcerate a non-filer, and when a non-filer is sent to jail, his or her family is likely to wind up on the welfare rolls.
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