At a Glance
It’s that time of the year again. You’ve dreaded Tax Day, you’ve procrastinated on filing your tax return, and now it’s time to wait and see. Maybe you’re daydreaming about the things you’ll spend your tax refund on. Or, if you’re like a surprising number of Americans, you’re worried that you’ve made a mistake – and maybe even that you will go to prison for it.
Over half of Americans filed their taxes themselves last this year, according to Credello’s new Tax Refund Stress Survey of 1,000 people that took place in April. The survey participants were ages 18 to 54 years old. 53% of respondents filed their taxes with an online software system and 12% brave souls did so all on their own. But the people surveyed are not all that optimistic about the outcome of tax season this year – 21% of them expect to receive significantly less money than last year. Not to mention the stressors that come into play once their tax return is filed.
The top tax return stressors and concerns
You would think that filing your taxes would come with relief, but tax refund stress is a real thing. While respondents’ top worry is that they didn’t maximize their refund, with a third of people feeling stressed about that, they are also scared that they have made a mistake that will result in no refund at all, an audit by the IRS, or even jail time.
In case you’re wondering, you can’t go to jail if you are unable to pay your tax debt. But if you find yourself in a challenging situation with different types of debt on top of owing money to the government, try this debt consolidation calculator to come up with a plan.
Nearly 25% of respondents are concerned that they have made a mistake and will get audited by the IRS, while nearly 14% of respondents are stressed about not getting any money because of a mistake. And here’s the shocker: Almost 10% of respondents are scared that they will go to jail because of a messed-up tax return.
Clearly it is common to worry about your taxes. Sam Swenson, a fee-only financial planner, CPA, and member of the Credello Expert Review board, told Credello, “While the penalties for not paying your taxes (on time or at all) are steep, the probability of being audited is significantly less than 1%. If you are entirely up front and honest while preparing your tax return, there is really very little to worry about. So long as you keep accurate records, double check your work, and file on time, you can sleep well knowing the audit threat is quite low for most people. If you’re feeling uncertain, consider working with a professional (either a CPA or an EA) who can act as a second set of eyes.”
Check out the infographic below for more stats from our survey:
Lacking confidence in the accuracy of your tax return
So if you lack confidence in the accuracy of your tax return, you’re not alone. In fact, about 6% of respondents reported not feeling confident at all that their taxes were filed correctly, and about 11% said they were hardly confident about that.
To help you feel more secure in the future, you can hire an accountant like 25% of people did. And if you’re wondering whether those worries are unfounded or warranted, let’s look at the likelihood of going to prison over taxes.
Can you go to jail over taxes?
It’s possible, but unlikely. Keep in mind that 98% of the time, the IRS punishes tax fraud with civil penalties, according to the Tax Policy Center.
For example, owing money to the government might land you in civil court, where you’d be expected to pay the money back. Making an unintentional mistake could cost you money as well. Tax negligence can result in a 20% penalty added to your tax bill. But in order to go to prison, you would have to have criminal charges filed against you – not civil ones – for crimes such as tax fraud or evasion.
What exactly is tax fraud? Intentionally deceiving the IRS by submitting incorrect information on your return, such as concealing a source of income. This can result in as much as a 75% civil penalty – in other words, a big fine. Unreported income can also result in criminal prosecution and potential jail time. Filing a fraudulent report can lead to up to three years in prison, and misrepresenting financial details or concealing them can result in up to five years in prison.
Another example: Failing to disclose offshore bank accounts, which can result in a five-year sentence.
You could also get in trouble for failing to file your tax return – this can lead to up to a year in prison, but it’s a highly unlikely outcome.
So, the chances of jail are pretty low but one thing you should be aware of this year with your taxes is that while many people do receive refunds, you might not. Swenson said, “This is due to a variety of factors, the most common of which is that your employer failed to withhold enough from your paychecks over the course of the year, leaving you with a bill at tax time. This can be easily sorted by contacting your employer’s HR department and discussing the issue so that it doesn’t happen again in future tax years.”
Tax debt relief options
People who can’t pay their taxes on time may be able to qualify for a form of tax debt relief from the IRS. There are several types of programs, including:
- Payment plans
- Partial debt settlement
- Full debt settlement
You could qualify for this debt relief if you have an unexpectedly high tax bill, a natural disaster hit your home, or other financial hardships that make it difficult for you to pay your bill.
There are a number of benefits to taking advantage of tax debt relief, primarily lowering or even eliminating your debt. It can also help you avoid serious consequences of not paying taxes such as wage garnishment, a bank levy, or a lien on your property.
Learn more: What is tax debt relief?
This survey was conducted by a third-party survey platform – Pollfish, on behalf of Credello. The sample of 1002 americans (ages 18 to 54) in the United States was surveyed on April 28th, 2022. The results have been weighted to balance responses to census statistics on the dimensions of age and gender. For complete survey methodology, please contact [email protected]