Owing back taxes is not a criminal offense, though unpaid taxes can result in significant fees and penalties. However, if you attempt to avoid payment or assessment of your taxes by using illegal means, you may face criminal penalties for tax evasion, which is a white-collar crime. If you are guilty of tax evasion in California, you face several consequences including but not limited to tax liens, damage to your credit and possibly jail time.

Simply failing to forget to file and pay your taxes is not a criminal offense. FindLaw outlines what actions do constitute criminal behavior. Some such actions include failing to declare all of your income, deliberately overstating your deductions or expenses or attempting to avoid the IRS’s scrutiny by failing to file a tax return when you have taxable income to report.

FindLaw warns that there is a long list of penalties for trying to evade your tax obligation. For instance, the IRS may fine you up to $250,000 for failing to file your tax return. If you cannot afford to pay your tax debt, file anyway, as the penalty for failure to file is 10 times more than the penalty for failure to pay. 

In addition to having to pay a fine, the law requires the IRS to charge interest for late payments. The interest begins to accrue on the due date of your return regardless of extensions and continues until you pay the amount in full.

The penalties for tax evasion go far beyond hefty fines and interest. The U.S. government views tax evasion as a felony offense, one for which the United States Attorney’s Office will not hesitate to prosecute you. If convicted, you face up to five years in federal prison.

If you happen to file but fail to pay, the government can take 15 percent of your Social Security benefits to gain back some of what you owe. It may also place a federal tax lien on your property if you do not pay your taxes in full within 10 days of a tax assessment. If your case is extreme, the IRS may seize your property, retirement accounts or the entirety of your social security payments to satisfy your tax debt.

Tax evasion may also result in damage to your credit score. If the IRS reports you as having a “seriously delinquent tax debt,” the Department of State may refuse to issue or renew your passport. 

The content shared here is for educational purposes only. It should not be construed as legal advice.