Failure to File Income Taxes

Consequences of Not Filing

It is a crime not to file a tax return if taxes are owed. By contrast, there is no criminal penalty if you file but can’t pay your taxes. You’ll owe interest and penalties, but you won’t be sent to jail. So even if you don’t have two dimes to rub together and owe a bundle of taxes, file your return. If you ignore this advice and fail to file, you can be fine up to $25,000 per year and/or sentenced to one year in prison for each unfiled year. Our justice system, however, doesn’t have enough jails to put away even 1% of the nonfilers, so going to jail is highly unlikely-even if you owed hundreds of thousands of dollars.

IRS Hunting For NonFilers

The IRS looks for nonfilers through its computerized Information Returns Program (IRP). This tremendously effective operation matches information documents-W-2 wage statements and 1099 income reports from payers (such as your client or the bank where you earn interest on your deposit account)-against tax returns you have filed. If the computer search fails to find a return, the IRS initiates a Taxpayers Delinquency Investigation, or TDI. A TDI is an IRS search to find out why a taxpayer didn’t file a tax return.

TDIs usually begin with computer-generates notices. If you don’t respond to the notices, your case is eventually turned over to a tax payer service representative for telephone contact or more letters. If the IRS is really serious, your file is assigned to a revenue officer at your local IRS office who goes out looking for you.

If you’re an Independent contractor, earn investments or interest income, sell real estate or stocks, the IRS receives payment information on you annually. The IRP will probably catch that you didn’t file. The IRS is about 12 to 24 months behind in notifying the nonfilers it discovers. So don’t think that because you haven’t heard from the IRS within a year or two after the filing due date you are home free. The IRS will catch you-it just a matter of time.

IRS Notifying NonFilers

How The IRS contracts you is the key to how seriously the IRS views Your case. There are four ways you can be notified-and they are not mutually exclusive. If the IRS tries one of the following methods and you don’t respond, it will no doubt try another.

  • Written requests from the IRS over a 16-week period. Most nonfilers are initially contracted in this relatively nonthreating manner. Threats come later if you ignore these notices. These notices usually mean that you aren’t targeted for criminal nonfiling.
  • Telephone call or letter with a deadline to get your returns filed, usually within 30 days.
  • Visit or call from an IRS agent. The officer will give you a deadline to file the missing returns directly with him or her, or will offer to help you prepare your returns. If you still don’t file, the IRS can legally prepare a return for you, based on any information it has and guesses it makes.
  • Visit by a Criminal Investigation Division agent. This is the very worst way you can be contracted. This means that your nonfiling is the subject of a criminal investigation. This usually happens only if the IRS suspects you of not reporting hundreds of thousands of dollars in income over multiple years.

Remember: Anything you tell me is confidential as I am a Lawyer.

Anything you tell a CPA or Accountant is not confidential and must be disclosed to the IRS by the CPA or by the Accountant.

Dale can help. Please call 817-877-5995 or toll free at 800-651-0528.

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