If you purposefully avoid paying your taxes, you could face hefty fines and prison time. The IRS states that if you do not pay your taxes, you could face felony charges and the requirement to spend no more than five years in prison.
The IRS will not pursue you on a criminal level if you cannot pay your taxes. However, if you do not report your full income on your full taxes or purposefully avoid paying your taxes, the court may order time in prison as part of your sentence.
Not reporting income
You could face charges for tax evasion if you leave out specific transactions that added to your income. For example, if you earn money from a side business or made a profit on the sale of a business and knowingly do not report these earnings, the IRS could charge you for tax evasion.
Purposeful avoidance of taxes
If you purposefully hide financial information or make false statements about your tax situation to the IRS, you could face criminal charges. For example, if during an audit, the IRS asks you about your income and you purposefully give false information, they may charge you with tax evasion.
The IRS generally only pursues tax evasion cases for major cases and not those who make an effort to pay their taxes accurately and on time. If the court does find you guilty, you will have to pay an expensive penalty and repay the taxes you owe along with the potential of spending time in prison.