He was convicted for criminal tax evasion, meaning he didn't tell the IRS that he won. So he didn't pay taxes on the award and then lied about it to the IRS, that's why he is going to jail. Specifically, it would be a willful failure to pay tax under IRC section 7203 and probably another charge of fraud under IRC 7207. Plus he will have to pay the tax (probably about $350,000) plus penalties for filing a fraudulent returns, under section 6663, (which would equal about $475,000), plus interest.
A decent tax attorney, however, could have kept him out of jail by advising him to do a voluntary disclosure, which by doing, would avoid the criminal charges under section 7203 and 7207. He would still have to pay the penalties and interest. Unfortunately, once the IRS started to investigate, voluntary disclosure doesn't work and he should have accepted to earlier plea bargain.
Bottom line, Richard Hatch acted like an idiot and should have talk to a lawyer as soon as he won survivor.