I have a tax liability dating back to 1999. I owe federal and state taxes. I was a real estate agent since 1995 and i had a hard time making my estimated payments. This year has been especially hard as i have not sold many homes and i have outstanding tax debt in excess of $133,000. Recently i was contacted by the IRS and the agent said that i was willfully failing to pay my payments and threatened me by saying that he would transfer the case the IRS criminal department. I told him that the IRS cant put debtors in prison for non-payment and he just laughed. Can someone shed some light as to whether i can be put in jail for not making my payments to the IRS?

Yes, jail time is a penalty for non-payment of taxes. Taxpayers are often their own worst enemies. Hire a tax attorney, don't mess with the IRS.