When you can barely make ends meet, you may wonder how you can even pay your taxes. Know that you are not alone. Millions of Americans are in the same boat, but many of them do not go to jail. This is because intent matters. As long as you are not intentionally trying to defraud the IRS, the agency is willing to help you.
The legal consequences of not paying taxes
Generally speaking, the IRS is unlikely to send you to jail for making mistakes when filing or being unable to afford your tax bill. At most, the worst that will happen is having to pay fines or incur interest on the taxes you owe. However, this does not give you a license to avoid filing or paying taxes altogether.
If the IRS finds you intentionally committing tax fraud, you may face jail for over a year. Falsifying or concealing financial information on your tax returns to avoid paying taxes is tax fraud.
Moreover, it’s crucial to understand the difference between willfully failing to file a tax return and accidentally forgetting to file one. The former is intentional and illegal, while the latter can be an honest mistake.
The IRS typically recognizes that mistakes can happen or that certain situations can make someone unable to pay. That’s why the agency offers various payment programs to help taxpayers get back on track with their tax obligations.
Apply for a payment plan
Instead of committing tax fraud, taxpayers explore the different payment programs the IRS offers and see where they qualify:
- Installment agreement – Taxpayers can pay off their outstanding balance by setting up a short or long-term payment plan with the IRS
- Offer in compromise – Taxpayers may settle a lower tax bill than the original amount they owe
- Extension to pay – Taxpayers may request the IRS to delay collection until their financial circumstances improve
If you find yourself in a situation where you can’t pay your taxes, it’s best to approach the IRS before your penalties get worse. It might be tempting to misrepresent your income, but you might only get yourself into more legal trouble. The IRS has many tools at its disposal to investigate tax fraud and other illegal activities.