We are still amazed about how many people call us or come into our office having not filed their taxes for multiple prior years. Some people file for an extension ever year at tax time, while others work feverishly to get them done by April 15th. What happens if you don’t file your taxes? Obviously, we don’t ever recommend using this as a strategy. As the famous saying goes, the only thing you can count on in life are death and taxes. Beyond the interest you will owe for failure to file/failure to pay/underpayment issues, there could also be a number of penalties that you could face as well.
Unless you want the old Wesley Snipes issue, evading paying taxes is illegal anyway that you slice it up. It’s our opinion that the IRS is going to get even tougher on these non-taxpayers, and if you are found guilty you could be subject to massive court determined fines, jail time, or possibly both.
If you look at the number at the bottom of page one of your personal tax return you will see an amount called your adjusted gross income. It is an important number because it sets the bar on other potential deductions you can take. Since employers today are reimbursing less and less employee expenses, you should keep very close track of your unreimbursed employee expenses. You must make sure the expenses are for ordinary and necessary items that help you carry on your normal trade. You can see an entire list of possible deductions on the IRS website. This could be a big one come year-end.
The next really difficult question to answer is really around whether or not you intended to defraud the IRS or really were you just neglecting filing the taxes. In this case the penalty is 20% of the portion of the underpayments attributable to the negligence. (www.irs.gov)
A Frivolous Return
Some people think it’s cute to be a court jester with the IRS. In these difficult economic times, some taxpayers may protest the IRS by making their job more difficult than it should be. Generally, a frivolous return may omit information that makes it necessary to determine a taxpayer’s liability such as their Social Security number. There can be a fine imposed of $500 per frivolous return.
No matter how many years you are behind, filing taxes is like saving for retirement. It’s never too late to start. Get all of your tax documents together, and get yourself down to a good tax preparer to being sorting through the mess. It’s either get them done, or one day you could find yourself doing jail time.
That doesn’t sound like a wise money move.