Will You Go to Jail For Not Paying IRS Employment Taxes?

Unpaid employment taxes can prompt a variety of harsh consequences. Typically, these involve fines, although, in severe situations, liens may also be assessed. Upon receiving notices of unpaid taxes, however, many business owners fear even worse repercussions, such as possible jail time. Keep reading to learn when and under what circumstances such fears are realistic:

Is it a Crime to Not Pay Employment Taxes?

According to Section 7202 of the Internal Revenue Code, the willful failure to collect, truthfully account for, or pay employment taxes constitutes a federal crime. This is punishable by fines of up to $10,000 or up to five years of imprisonment. Additionally, those found guilty of this crime may be liable for prosecution expenses.

Jail as a Last Resort for Unpaid Taxes

In general, it is not in the best interest of the IRS to seek criminal penalties in response to unpaid taxes. This approach can be costly and time-intensive. Instead, the IRS follows a series of steps, beginning with the most unobtrusive options possible before escalating to aggressive collection action.

Often, the process begins with a 903 letter, which lets business owners know that the IRS is aware of unpaid taxes. This letter serves as both a warning and an opportunity to get tax issues cleared up before the agency moves on to assessments and collection.

A continued failure to pay taxes may result in consequences such as the trust fund recovery penalty (TFRP), which charges 100 percent of the value of the unpaid taxes to those who willfully neglect to pay up.

Ultimately, while jail is rare among those who fail to pay employment taxes, it remains a real possibility. As soon as you become aware of the problem, it’s crucial that you take action. Get in touch with the Highland Tax Group today to learn about your best options for dealing with unpaid employment taxes.