In the thread in GQ about casino winnings I posted that you could go to jail for not paying your taxes on your winnings. On further thought though I began to wonder…
Taxes owed the government constitute a debt. I thought (and correct me if I’m wrong) that in the US you cannot be sent to prison for non-payment of a debt. Back in colonial times I believe Great Britain had a thing called debtors prisons and our founding fathers did not like the concept. As a result the US prohibits sending people to prison because they can’t pay a debt.
I know your wages can be garnished, your property seized and so on to pay debts. I also believe you can go to jail if a court told you to pay but you don’t (in this case you’re guilty of contempt of court and that’s why you go to jail). However, take the following hypothetical:
You’re dirt poor, basically living on the street. You take $20 someone gave you and win big at the race track and walk out with $10,000 (take the numbers given if such a winning on a $20 bet is unreasonable or impossible). You know you have to pay taxes and the track makes you fill out IRS forms. You walk with your money and spend it all. The IRS comes knocking and asks where its money is and you say, “Sorry…spent it all. Go ahead and sue if you want because I have nothing of value anyway.”
Would the IRS have the courts toss you in jail for this or is the IRS SOL?
Say you took $1,000 and won $100,000 in my example above so no one says that you would be exempt from paying taxes on $10,000 anyway making the whole thing a moot point.
You can go to jail for failure to file, or failure to file accurately… but not for failure to pay. In the situation you describe, jail would not be an option.
However, the government has plenty of recourse left. They may garnish your wages, and get their money back that way. They may sieze and sell your property, personal and real, to get their gelt.
You may wish for jail by the time they’re through with you.
Yes. Think Al Capone, for one prominent example. Tax evasion is a federal crime, and they can toss your deadbeat butt in jail for it. But in most cases, the IRS would rather figure out a way to get its money than send you to jail. For an example of this, think Willie Nelson.
And you’d have to pay taxes just the same on your gambling winnings, whether it’s $1 or $1 million. They’re much less likely to catch you if you omit the $1, however.
I disagree, Bricker. 26 U.S.C. 7203 says, in pertinent part:
I suppose he could argue that being broke negates “willfully” refusing to pay, but that’s going to be a tough argument if he has income coming in and still refuses to pay up.
And Jeff_42, just as a rule of thumb, DO NOT fuck with the IRS. If you want to contest something in good faith, that’s fine, but trying to scam the Commissioner is a very bad idea indeed.
FTR I ask this purely cuz I’m curious. I don’t gamble at all…ever (ok I did once with $1 in the airport in Las Vegas…lost the dollar). I also have never scammed the government and especially not the IRS. Indeed, I probably pay more than I should and avoid write-offs I’m probably entitled to just to avoid any questions of what is right or wrong.
I am curious as to the code minty green quoted. Do I remember wrongly about debtors prisons and that it was disallowed in the US? Was this just something we didn’t do but was never codified into law thus allowing the IRS to jail you?
This is all just curiosity…don’t try any of this at home!
I am unaware of any laws abolishing debtors prisons in America. My sense is that the people who came to the Colonies thoroughly despised the British system of debt “collection,” and so they didn’t replicate it here. Not to mention that putting people in prison for bad credit management isn’t likely to get MasterCard paid back anytime soon. Even the IRS would much rather get paid than toss anybody but the most recalcitrant tax dodgers in jail.
Tax evasion is a crime. Tax avoidance is not. The difference is basically whether or not you reported all income. If you fail to report all income, you are probably guilt of tax evasion. On the other hand, if you report all income, but take too many deductions that are later disallowed, you are not guilty of a crime; you just have to pay the taxes and penalties.
Assuming that you thought you had a good faith basis for those deductions. But simple refusal to pay, regardless of whether or not you report the income, looks to me like a crime under that statute above.
Actually, simply not paying will not get you a stint in the greybar hotel. However, hiding, transfering, or otherwise concealing assets- ie a WILFUL act of keeping your money out of Uncle Sams fingers- THAT can get you in prison. Generally, the US Attorneys want & demand to see some WILFUL act of fraud or evasion. So, if you simply did not file your tax returns- no prison (altho there will be HUGE civil penalties), but if you kept a second set of books, or wilfully reported less income than you earned, werea tax protestor, filed an 'exempt W-4", or were engaging in a crimonal enterprise, and did not file- then you could get prison time.
Bankruptcy fraud, hiding money in offshore accounts, selling your house to your brother for a dollar, and similar things could get you arrested for wilful acts of non-payment.
However, if you won 100K, and did not file or pay, but simply spent it all, then they would not, in all likelyhood, arrest for for CRIMINAL tax evasion. However, the CIVIL penalties & assessments- would be brutal.
A good friend of mine got involved with one of those bogus tax-rebel groups. You know, “The gov’t has no legal right, blah, blah, blah…” Anyway, the IRS happened to catch up with him just as he was getting a divorce. The feds put his divorce on hold, and garnisheed all his wages, leaving him just enough to write a support check to his almost-ex-wife. If he hadn’t been able to move in with his girlfriend, he might have been sleeping in the factory where he worked.
As Frank Zappa said, (and Minty Green apparently agrees,) “A mountain is something you don’t wanna fuck with.”
Also, there is no statute of limitations on failure to file.
If the IRS ever gets a comprehensive database, all those summer jobs we skipped out of paying taxes on back in high school might come back as $10,000 in interest and penalties.
What about if you don’t file, but don’t owe any tax? I had heard somewhere that there wouldn’t necessarily be any penalties in that case . . . not that I’m about to try skipping the April 15 deadline or anything . . .
You do not have to file in certain cases. In MOST cases, that would be if your STD deduction and self-exemption are higher than your income. Beware, however, if others claim you as a dependent, and if there is “unearned income”. But, since you want to get your refund, you SHOULD file.
“All those summer jobs”- would LIKELY come below your STD deduction & self-exemption. In any case, when the IRS does a “substitute for return”- those are the only decuctions they give you. So, if you EARNED a couple thousand dollars- since that is less than your personal exemption- you are OK.
Penalties, for Federal Income taxes, are almost always figured as a % of what you OWE. Thus, you could easily amass some 45% in penalties by not filing. BUT- if you owe nothing, 45% of 0= $0. A very few penalties are flat dollar amounts, eg.- for “frivolous returns”- which means sending in a return with protestor type language PLUS insuffient or grossly incorrect tax info. Technically, you COULD send in a valid return, but with a note that says you think “income taxes are unconstitutional”- and they can’t penalize you. BUT- that would be REAL foolish.
Asknott- Yes, the IRS is not real fast- but they ARE sure. Lots of fools have thought they were “getting away with it”, but meanwhile, on some overworked IRS agents desk, his case is slowly being compiled. When those dudes finally get around to it, tho- you’re history.
“What about if you don’t file, but don’t owe any tax?”
Cecil wrote about this already. He said most clearly that you don’t have to file if you don’t owe any taxes. You should file if they owe you though
You wouldn’t go to jail for being too impoverished to pay your taxes. The crime that could send you to prison (or at least subject you to criminal consequences) would be in not filing a tax return, or otherwise trying to keep the government from taking their cut. There are all sorts of situations in which you file but do not pay the entire amount, although I’m sure its a big hassle and they probably sock you with interest or something. Being in debt is not a crime in America, but perjuring yourself (which, technically, you are doing if you don’t file a tax return or lie on one), is.
