Paying taxes is important, but some worry about getting into trouble. Going to jail for not paying taxes correctly is rare. In 2015, only 1,330 out of 150 million taxpayers faced serious consequences for not paying taxes properly. Learn more about IRS Tax Help Florida
The tax office mainly focuses on people who say they owe less than they do, or who forget to send in their tax forms. They usually don’t go after people who can’t afford to pay. But if someone hides their money and things they should use to pay, that’s different.
When the tax office thinks someone is hiding money, they first check the tax forms. They look for big mistakes that the taxpayer knew about and did on purpose. These mistakes are usually for a lot of money and have been happening for a few years, showing it was planned.
Here’s what the tax office looks for:
Not Reporting All Your Income: This is a big problem. It’s when you leave out some of the money you got, like from selling a business or doing a side job. This has caused problems for many individuals.
Being Sneaky During an Audit: If you lie or hide important information from the tax office, you’re in big trouble. The tax office calls these behaviors “badges of fraud.” They’re signs that someone is trying to get away with not paying their taxes.
Example: Hiding Extra Money from a Side Job
John is a firefighter, but he also has a plumbing job on the side. He mostly gets paid in cash for this work. From 2011 to 2013, he made about $35,000 a year from this side job.
- Sign of Fraud: Not telling about the side job.
During an audit, the tax office checks John’s tax forms for 2013. They ask if he got any other money besides his firefighter job. John says no. When they ask for his bank records, he only gives them his main account.
- Signs of Fraud:
- Not telling about the side job.
- Not telling about another bank account.
Even though John didn’t get statements for the money he made from plumbing, the tax office did. They see that John got paid by ABC Builders and earned some interest from Central Bank.
- Sign of Fraud: Trying to hide money.
The tax office keeps looking into John’s finances and finds even more money he didn’t tell them about.
- Signs of Fraud:
- Taking a long time to give information.
John ends up in a lot of trouble. He has to go to jail and pay back the money he didn’t give in taxes, plus extra for trying to trick the tax office.
Most people don’t have to worry about going to jail for taxes. If you’re honest and try your best to pay what you owe, you won’t end up like John.