Penalties of Committing Tax Fraud

If you intentionally fail to declare taxable income, file a return or pay your due taxes, you are committing tax fraud. This is a criminal offense, as you are depriving the state of its funding. This can include failing to remit sales tax or payroll tax from your business. It can also mean under-reporting your income to reduce the amount of tax for which you are liable.

Other common attempts at fraud include failing to declare revenue streams, failing to declare assets or claiming personal purchases as business expenses. tax laws are particularly strict. Attempting to evade payment or making fraudulent claims on personal or business tax reports could cost you more than you think, and may include jail time.

What could you be charged with for tax fraud?

The charge for tax fraud can depend on both the amount of money you owe, and whether you have previously been convicted of tax fraud. You may be charged with a felony or a misdemeanor – both are criminal charges, though misdemeanors carry lighter punishments. Tax fraud convictions will be included on your permanent record.

  • First degree felony: This is the charge if you owe over $100,000. This is punishable by up to 30 years in jail, and a potential $10,000 fine.
  • Second degree felony: You will be charged with this if you owe between $20,000 and $100,000. You could get up to 15 years in jail and be given up to a $10,000 fine.
  • Third degree felony: This is punishable by a five-year jail term, and a potential $5,000 fine. If you owe over $300 (even one dollar over) but less than $20,000, it is a third-degree felony. You can also be charged with a third-degree felony if you owe less than $300, but have been convicted of tax fraud two or more times previously.
  • First degree misdemeanor: You will be charged with this if you owe less than $300, but have been convicted of tax fraud once before. This could carry up to a one-year jail sentence and a $1,000 fine. You may also be charged with this for failing to register for taxes or failing to keep proper records.
  • Second degree misdemeanor: This is the charge if you owe less than $300 and it is your first conviction for tax fraud. This can result in a 60-day jail term and a $500 fine.

It is important to remember that fees, fines and interest will be due on top of the amount of tax owed. You may still face jail time after the full amount has been paid.

Other Penalties

Depending on the way the fraud or evasion is committed, there are numerous penalties and losses that could be incurred once you have been charged. Some examples include:

Failing to remit your business sales tax where the Department of Revenue could move to suspend or even revoke your professional license and trading certificates. In addition to this, the department could prevent you from attempting to re-register the business. Once qualified for’s fuel tax refund, and if it is used to make a fraudulent claim, you will lose your refund permit for at least two years. If you make a fraudulent claim as part of a credit program, you can be charged with a second-degree misdemeanor. You will also have to pay back your credit, as well as a fine equal to the full amount of credit.

There are full lists of specific types of fraud and evasion, along with their penalties and fines, available online.

IRS Involvement

There are several ways in which the Internal Revenue Service can collect the money you owe. The IRS can levy or seize a certain amount of your income, between 30 to 70 percent. Even social security income can be levied. The IRS may freeze your bank account using a bank levy and withdraw the entire amount. In addition, your assets can be claimed, from cars to properties, putting a lien on them or even seizing them.

If all tax returns have been filed and you have declared all your assets, you should be able to set up a repayment plan. You may be able to adhere to a minimum set by the IRS. If you owe a large amount, your income and expenses will be assessed. You will be allocated an amount for monthly expenses, and the remainder of your income will go directly towards paying your debt. You may be required to sell some of your assets in order to pay.