Updated Nov 2025
What Are the Consequences of Tax Crimes?
Tax evasion can lead to serious penalties, including jail time and fines, and while charges are rare, a conviction carries a high risk of imprisonment. According to the U.S. Sentencing Commission, 66% of people convicted of tax fraud were sentenced to prison. What is the average jail time for tax evasion? 15 months.
Keep reading to learn the differences between tax evasion, avoidance, and fraud according to the law and potential penalties for tax evasion and avoidance.
Key takeaways
- Tax evasion is a tax crime that may lead to penalties and imprisonment.
- Tax evasion is a type of tax fraud.
- Tax fraud can be criminal, leading to penalties and imprisonment, or civil, which leads to penalties.
- Contact a tax attorney ASAP if you’re being investigated for a tax crime.
| IRS Code Section | Offense Description | Max Jail Time | Max Fine Individuals | Max Fine Corporations |
|---|---|---|---|---|
| 26 U.S.C. 7201 | Tax evasion | 5 years | $250,000 | $500,000 |
| 26 U.S.C. 7206(1) | Filing a false return | 3 years | $250,000 | $500,000 |
| 26 U.S.C. 7212 | Obstructing IRS operations | 3 years | $250,000 | $500,000 |
Tax Evasion vs. Tax Fraud
Tax evasion and tax fraud are often used interchangeably, but they have distinct meanings in the eyes of the IRS and the law. Think of it like this: Tax fraud is a broad category of civil and criminal wrongdoing; tax evasion is a specific type of tax fraud.
Tax fraud encompasses both civil and criminal tax evasion. It’s the deliberate act of deceiving the IRS or state tax authorities to reduce your tax liability. It’s a broad term that covers any intentional misrepresentation or omission on your tax returns.
Examples include:
- Falsifying documents, like invoices or receipts
- Claiming fake dependents or credits
- Lying about your income or business expenses
- Filing a fraudulent tax return by using someone else’s identity
A keyword here is “willful.” The IRS must prove that you knowingly and intentionally broke the law to avoid paying taxes.
Tax evasion, a type of tax crime, is a deliberate attempt to deceive the government by intentionally trying to avoid paying the taxes you legally owe. Federal law (26 U.S.C. Section 7201) defines this specific, criminal offense as any attempt to “evade or defeat” a tax.
The main differences between fraud vs evasion are:
- Scope: Tax evasion is a specific crime of non-payment. Tax fraud is a broader term that includes non-payment, falsifying returns, misrepresenting information, and other deceitful acts.
- Legal classification: While tax fraud can be a civil or criminal offense, tax evasion is always a criminal offense. Civil fraud can result in heavy financial penalties, but criminal charges—including tax evasion—can lead to prison time.
In simpler terms, you could commit tax fraud without necessarily being charged with tax evasion. If you filed a fraudulent return to get a refund you weren’t entitled to? That would be tax fraud. If you systematically hid millions of dollars in a foreign bank account to avoid paying taxes on that income? That’s a clear case of tax evasion.
While you can’t have tax evasion without an element of fraud, the term “tax fraud” covers a much broader range of illegal, deceptive activities.
Also, note that tax fraud can be civil in nature – if that happens, you’ll face a penalty of 75% of the underreported tax, but you won’t have to worry about criminal charges..
Criminal Penalties for Tax Evasion
The agency has a dedicated division for serious tax crimes called the Criminal Investigation (CI) division. It handles cases of suspected tax evasion and other financial crimes. If you’re under investigation for tax evasion, the first contact will nearly always be from a special agent within the CI.
Unlike the civil collection divisions of the IRS that send automated letters (like CP notices), the CI operates like a law enforcement agency, with more direct, formal communication.
- You may receive a personal visit or phone call from an IRS special agent. They will identify themselves and the CI division.
- The IRS may serve you or your business with a grand jury subpoena. This formal legal document requests records, documents, or testimony related to your financial affairs.
- The IRS may start contacting third parties, such as your bank, employer, or business partners, to request information about you. This action is a strong indicator that the agency is building a case.
- If you were previously in contact with the IRS about a civil issue and they suddenly stop responding to your inquiries, it could indicate that your case was referred to the CI for a criminal investigation.
If you receive any of these signs, do not procrastinate—act immediately. The best strategy? Contacting an experienced tax attorney who specializes in criminal tax cases. They can represent you, communicate with the IRS on your behalf, and protect your rights throughout the process.
What Are the Consequences of Tax Evasion?
A judge determines the punishment for tax evasion based on your specific situation. They use federal sentencing guidelines along with the details of your case to determine a fair and reasonable sentence.
A judge will also consider your criminal history. The most severe sentences are reserved for substantial crimes, where the government has incurred significant financial losses, and the person has a history of similar offenses.
On average, a person convicted of tax evasion will spend 3 to 5 years in prison, with a maximum sentence of five years. These people also face significant financial penalties, with fines reaching up to $100,000.
Charged With Criminal Tax Evasion? Here’s What to Do Now.
If you’re charged with criminal tax evasion, take a deep breath and then take action. Your first—and most important—step should be to protect your rights and your future.
- Understand the urgency. Don’t try to handle this on your own. Because the CI division operates like a law enforcement agency, anything you say can be used against you. Trying to explain your side of the story without legal counsel can unintentionally harm your case.
- Get expert legal help. Hire a criminal tax defense attorney with specific experience in tax evasion cases. Don’t hire a general criminal defense lawyer or a regular CPA. A specialized tax attorney understands the intricacies of criminal law and the complex tax code.
A good attorney will act as a buffer between you and the IRS, so all communication goes through them. Your attorney will analyze the charges against you, your tax history, and the government’s evidence. They’ll help you understand the charges, your legal rights, and potential outcomes, and discuss possible defense strategies or resolution options. They can negotiate on your behalf, working with the IRS and Department of Justice to seek the best possible outcome, whether that’s a reduction in charges or a plea agreement.
No matter what, don’t wait. The sooner you bring an experienced attorney into your case, the more options you have to manage the charges and protect your future.
Civil Penalties for Tax Fraud
While tax evasion is always a crime, it’s possible to be charged with tax fraud and only face civil penalties. But make no mistake—the consequences can still be quite serious.
If you don’t file your tax return on time, the IRS can hit you with a failure-to-file penalty, which is 5% of the tax you owe if you file within one month from the due date. This penalty recurs monthly until the return is filed and can reach up to 25% of your original tax liability. If the IRS asserts a civil fraud penalty, the penalty jumps to a painful 75% of the unpaid tax.
As if that penalty wasn’t enough, you may also likely face failure-to-pay penalties. This penalty adds 0.5% to your overall tax debt each month and can also reach up to 25% of your overall tax bill until the balance is paid in full. That stacks on top of the other penalties.
Finally, in addition to the previous penalties, interest continues to accrue monthly on your unpaid debt. If you allow the debt to pile up and don’t talk to the IRS, it will take more aggressive actions, potentially placing a tax lien on your property or other assets, garnishing your wages, or taking some of your Social Security benefits.
What to Do if You’re Charged a Civil Tax Fraud Penalty
If you’re facing civil tax fraud penalties, reach out to a tax resolution lawyer who can help you review your options. Civil penalties won’t stop building until you address them. If you procrastinate, the IRS could escalate your case and decide to impose criminal charges.
Will the IRS Charge Me With a Crime or a Civil Offense?
The IRS almost always prefers to handle cases as a civil matter, not a criminal one. Criminal charges are time-consuming and expensive for the government, so it reserves them for the most serious situations.
Before ever considering bringing a criminal case, the IRS will first try a variety of civil collection efforts, such as:
- Charging you with financial penalties and interest
- Garnishing your wages
- Filing a tax lien against your property
The IRS will, however, pursue criminal charges if it determines that your actions were blatant and willful.
What are the civil vs. criminal tax evasion penalties?
| Penalty type | Description | Maximum consequences |
|---|---|---|
| Civil penalty | Applied when fraud is suspected but not criminally prosecuted | 75% of underpaid tax, plus interest |
| Failure to file | Late return without fraud | 5% of unpaid tax per month (up to 25%) |
| Failure to pay | Late payment after filing | .5% per month (up to 25%) |
| Criminal penalty | Willful attempt to evade taxes | Up to 5 years in prison + fines |
| False return | Filing fraudulent return or documents | Up to 3 years in prison + fines |
Getting Back on Track With the IRS
Facing tax penalties is stressful, but there is a path for getting back on track. Your number one priority should be sorting out your situation and resolving your tax debt. By taking action, you can stop the penalties from growing, remove the threat of criminal charges, and improve your standing with the IRS.
Voluntary Disclosure
The IRS’s Voluntary Disclosure Program allows you to avoid criminal charges by coming forward voluntarily. The most important rule? You have to reach out to the IRS before it finds you. It’s a serious and complex process, and you may need to meet additional criteria as well. Always consult with a tax attorney first to ensure it’s the best option for your situation.
Amending Returns
Depending on your situation, you may be able to fix a past mistake simply by amending your returns (filing a corrected version of a previously-submitted return with the correct information).
Payment Plans
Once you’ve resolved any criminal concerns, you must arrange to pay your tax debt and penalties. The good news? The IRS doesn’t expect you to pay everything at once. It offers many payment plans for people who owe back taxes. You may qualify to spread out the debt in monthly payments over several years.
Tax Evasion Consequences: FAQs
We’ve put together answers to some of the most common questions we hear about owing back taxes and the IRS’s authority to collect.
Is Tax Evasion a Felony?
Yes. Tax evasion is considered a felony offense under 7201 of the Internal Revenue Code. It carries severe, long-lasting consequences. If convicted of a felony offense, you may lose certain rights, like the right to vote or own firearms.
Is Tax Evasion the Same Thing as Tax Fraud?
Not quite. Think of tax fraud as a big umbrella covering all types of intentional wrongdoing with your taxes. Tax evasion falls under that umbrella. It’s the illegal act of actively trying not to pay the taxes you owe.
Is Tax Evasion the Same as Tax Avoidance?
No, tax avoidance is a legal tactic to reduce the tax you owe. It can be very aggressive and detailed, but it’s within the bounds of the law. Tax evasion is using illegal means to avoid paying taxes – it’s a crime.
Get Help and Legal Representation Now
If you’re facing tax problems and worried about whether the IRS will view your actions (or inactions) as civil or criminal tax fraud, don’t procrastinate.
Tax evasion and criminal tax fraud charges carry serious criminal penalties, including imprisonment. Civil tax fraud penalties can increase tax debt and worsen your tax situation.
The good news? You don’t have to navigate the system alone. The Wiggam Law team of tax attorneys is here to help find a solution. We’ll help you understand your options, obligations, and rights so you can find the best path forward to get back in good standing with the IRS.
Are you ready to start? Call us at (404) 233-9800 or complete our online form to schedule a consultation now to begin your tax resolution journey.
