Average Jail Time For Tax Evasion
The average jail time for tax evasion is 3-5 years.
Evading tax is a serious crime, which can result in substantial monetary penalties, jail, or prison.
The U.S. government aggressively enforces tax evasion and related matters, such as fraud.
Despite the fact that there are thousands of websites online designed to scare you into believing that every little mistake you make with the IRS is going to result in you going to jail or face “Draconian penalties” (you won’t), when it comes to tax evasion — jail may be a very real possibility.
This is due to the nature and circumstances of a criminal tax prosecution.
We will summarize how the U.S. government enforces tax evasion and how the average jail time for tax evasion, convictions, and prison is determined.
What is Tax Evasion?
Tax Evasion is a criminal offense.
In order to be found guilty of tax evasion, you must be referred for criminal prosecution, charged with a crime, and the government must prove its case beyond a reasonable doubt.
As provided by the IRS (IRM):
“Evasion involves some affirmative act to evade or defeat a tax, or payment of tax. Examples of affirmative acts are deceit, subterfuge, camouflage, concealment, attempts to color or obscure events, or make things seem other than they are.
Common evasion schemes include:
- Intentional understatement or omission of income;
- Claiming fictitious or improper deductions;
- False allocation of income;
- Improper claims, credits, or exemptions; and/or
- Concealment of assets.”
Common Issues Involving Tax Evasion
There are various facts and circumstances that will help determine what a person’s sentence may be — and no two tax evasion cases are identical.
Common Questions involving Tax Evasion include:
- Is tax evasion criminal?
- Will the IRS prosecute me?
- Will I go to jail or prison?
- Will I lose my house?
- How long is the jail sentence?
I.R.C. § 7201 – ATTEMPT TO EVADE OR DEFEAT TAX
As provided the by the IRS:
“Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined* not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution. * As to offenses committed after December 31, 1984, the Criminal Fine Enforcement Act of 1984 (P.L. 92-596) enacted as 18 U.S.C. § 3571, increased the maximum permissible fines for felony offenses set forth in section 7201.
The maximum permissible fine is $250,000 for individuals and $500,000 for corporations. 1-1.02 Generally  Two kinds of tax evasion. Section 7201 creates two offenses: (a) the willful attempt to evade or defeat the assessment of a tax, and (b) the willful attempt to evade or defeat the payment of a tax. Sansone v. United States, 380 U.S. 343, 354 (1965). See also, United States v. Shoppert, 362 F.3d 451, 454 (8th Cir.), cert. denied, 543 U.S. 911 (2004); United States v. Mal, 942 F. 2d 682, 687-88 (9th Cir. 1991) (if a defendant transfers assets to prevent the I.R.S. from determining his true tax liability, he has attempted to evade assessment; if he does so after a tax liability has become due and owing, he has attempted to evade payment). [a] Evasion of assessment.
The most common attempt to evade or defeat a tax is the affirmative act of filing a false return that omits income and/or claims deductions to which the taxpayer is not entitled. The tax reported on the return is falsely understated and creates a deficiency. Consequently, such willful under reporting constitutes an attempt to evade or defeat tax by evading the correct assessment of the tax. [b] Evasion of payment.
This offense generally occurs after the existence of a tax due and owing has been established (either by the taxpayer reporting the amount of tax or by the I.R.S. assessing the amount of tax deemed to be due and owing) and almost always involves an affirmative act of concealment of money or assets from which the tax could be paid. As discussed in Section 1-1.04 below, it is not essential that the I.R.S. have made a formal assessment of taxes owed and a demand for payment in order for tax evasion charges to be brought. Tax deficiency can arise by operation of law when there is a failure to file and the government later determines the tax liability. United States v. Daniel, 956 F.2d 540, 542 (6th Cir. 1992).”
International Tax Evasion
Tax evasion is more common than you may think.
And, since there is no bright-line test for willfulness, Taxpayers are at a serious disadvantage in situations in which the IRS wants to pursue criminal tax enforcement.
Nevertheless, even if there are lingering issues of fraud or evasion, that does not mean the person will be subject to criminal prosecution or guilty of tax evasion.
It depends on the facts and circumstances of the taxpayer’s case and whether the government believes the case is a priority — and worthy of criminal enforcement.
IRS Alternatives to Criminal Investigation
The IRS is low on staff and resources.
Oftentimes, the IRS can achieve their desired result (getting your money) without having to pursue a criminal investigation against you.
Instead of pursuing criminal tax evasion, the IRS can draw facts from the same nucleus of facts — and use them to pursue other tax violations, such as tax fraud and FBAR/FATCA noncompliance (offshore) — which are primarily civil in nature.
FBAR Civil Willful Enforcement
When the matter involves offshore compliance, the IRS has several tricks up their sleeve.
One way the IRS can pursue significant monetary penalties against taxpayers without having to ever refer the matter out for criminal investigation is by enforcing FBAR penalties.
FBAR is the Foreign Bank and Financial Account Reporting form (aka FinCEN Form 114).
If you are required to file the form but miss the deadline, the penalties can be staggering.
Not only that, but the IRS only has to prove the FBAR case by preponderance of the evidence and not the criminal standard of beyond a reasonable doubt.
If a person knowingly or intentionally failed to report their foreign accounts (see Manafort), the IRS may be able to obtain a CIVIL penalty valued at a hundred percent of the maximum balance of the accounts.
The way the IRS achieves this is by issuing multiple 50% max balance penalties over several years.
*In years prior, the IRS could collect up to 300% (6 years, 50% Penalty) of the maximum value of the unreported accounts, but in recent years this has been capped at 100%.
Tax Fraud is the civil violation equivalent of tax evasion.
Depending on the facts and circumstances of a taxpayer’s violation(s), the IRS may pursue significant civil fines or penalties without having to refer the matter for criminal investigation.
If the IRS determines that the facts are so egregious as to require the government to pursue a criminal investigation, then typically the IRS will refer the matter to the IRS Special Agents for them to conduct a criminal investigation and determine whether the government should recommend criminal charges be filed.
What Can You Do?
Presuming the money was from legal sources, if you were willful, your best options are either the Traditional IRS Voluntary Disclosure Program.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure.
Contact our firm for assistance with getting compliant.