Why Beanie Sigel is heading to jail.

From TMZ.com:
Rapper Beanie Sigel has been sentenced to spend two years behind bars for stiffing the IRS out of more than $700k in back taxes.

Sigel -- who's worked with some of the biggest names in rap including Jay-Z and Snoop -- had previously pled guilty to not filing federal tax returns for the years 2003, 2004 and 2005.

During today's sentencing hearing in U.S District Court in Philadelphia ... Beanie told the judge he accepts "total responsibility" ... but griped about family members who allegedly spent him dry while he was serving time for drug and gun crimes back in 2004 and 2005.

"I haven't been able to get my career back on track since" ... Sigel told the court.

Beanie has until Sept. 12 to surrender to authorities to begin his sentence. Source

Why is Beanie Sigel headed to jail?
Why is Beanie Sigel going to jail instead of simply working out a payment plan with the IRS? As far as the IRS is concerned there is a HUGE difference between not paying your taxes, not filing your taxes, and flat out lying about your income. Purposely not filing your taxes at all or lying to the IRS are serious forms of deception, also known as tax evasion. You are not telling the IRS what you made or what your tax liability may be. That act is likely to be severely punished, particularly when you owe a substantial amount of money.

Consider what happened to Al Capone.
Even though the government struggled to find a way to convict him of serious crimes such as murder, the only one they were able to make stick was tax evasion. The FBI discovered money he accepted, but did not report to the IRS. That led to his ten year jail sentence for tax evasion. Lawfirms.com says that today, "If the IRS can demonstrate that the individual or company willfully did not file in an attempt to evade taxation, the IRS can pursue a felony conviction, which could include a fine of up to $100,000 and a maximum prison sentence of five years."

Ironically, HowStuffWorks.com reports, "Capone's conviction had another, unexpected effect: Criminals and legitimate citizens alike began to pay the IRS for back taxes." Any thoughts on if Sigel's conviction will do the same for people today?

Types of Penalties.
As far as the IRS is concerned it DOES matter why you didn't pay your taxes; there will be a penalty based on the reason. That means that not only will the tax amount be due but interest and penalties amount will also accrue until the total amount is paid off.

There are several types of penalties including the "failure to file penalty", "failure to pay penalty", and the "accuracy-related penalty". The amount of additional monetary liability various with each type of penalty.

Failure to file: 5% for each month the tax return is late, up to a total maximum penalty of 25% of the tax due on the tax return.

Failure to pay: 0.5% for each month the tax owed is not paid in full. No maximum limit.

Accuracy-related penalty: Generally 20% of the underpayment amount, or up to 30% if the underpayment was due to an undisclosed transaction (as listed by the IRS)

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