Am I going to jail if I made a tax mistake?
You’ve been a business owner for the last year. It is the first time you’ve run your own company, and fortunately, the business has done very well. You’re excited about the future and the revenue you earned.
However, you’ve only done personal taxes before. You attempted to do your business taxes, but you’re worried you made a mistake. This has created a lot of stress, as you’re concerned that you might lose everything you’ve worked so hard for in the business. You’re also worried that the IRS might accuse you of evading taxes and put you in jail.
Is any of this going to happen?
Was it an honest mistake?
It really depends on what happened and whether or not the IRS believes you did it intentionally. If you made an honest mistake, then the IRS is likely not going to arrest you or send you to jail or prison.
However, you may be audited. The IRS may still want you to pay the money you owe them or a certain amount in fines, but they understand that mistakes happen. For minor errors, you may be able to simply correct them.
When a mistake becomes a bigger problem
Tax issues that can trigger criminal charges and penalties are those where you’ve done it intentionally. If you purposefully attempt not to pay taxes or you don’t pay enough in taxes, you could face criminal charges. But again, not paying enough accidentally is a very different situation.
That said, any tax-related issue you encounter as a business owner could have a major financial impact on yourself or your company. You may be facing fines and penalties, and you may need to redirect resources away from routine operations toward preparing for an audit or addressing criminal charges.
Taxes, the IRS, and the potential criminal and civil penalties can be very intimidating. And the average person and small business owner likely have little more than a basic understanding of their options and obligations, so it is not uncommon for people to be nervous when it comes to tax issues. But awareness and information can help you make decisions to protect yourself and your business.