Any Downside To Not Filing A Tax Return?

Not getting money back that was withheld?

Perhaps inviting an audit or inquiry if you've had income and filed returns in prior years?

Perhaps inviting an audit or inquiry if you have a lot of income reported on

1099s that is offset by deductions the government wouldn't know about. For example, if you have $50,000 in income on 1099s but it is offset by $51,000 in deductions and exemptions. You technically may not need to file a return, but by doing so you put your deductions on record to maybe minimize the likelihood of getting a letter for not filing.

The converse of each of the above items.

The upside, in my opinion, is that in future years neither you nor the IRS will wonder what happened to your return for that year. And you never know when in the future such returns might come in handy, such as when applying for loans, benefits, etc.

In my experience it is generally easier to file a return than to explain why you didn't. :-)

MTW

In article you write:

Documenting a loss to carry forward, one time a few years back when I switched mutual funds in my daughter's college fund.

R's, John

Is there any upside to filing when it is not required? ====================== Noting 4 other replies so far....

I advise that someone who has a filing history and suddenly finds one's self in the non-required situation should file at least once or twice more indicating a zero tax just to get into the record that they are effectively "leaving" the tax system due to the filing requirement. One of the things that the IRS typically looks at for non-filers is what the last tax return filed says. Seeing a return that wasn't required may be sufficient to explain why a current year's return is not on file.

Who knows what the PPACA 2010 will do to this mess.

People in subsidised housing may be required to submit completed tax forms to verify income. They may be quired to submit "authorization" to look at tax filings

People iin CA with 1099-B's and capital losses or small capital gains such that they are not required to file federally will probably get a nastygram from the Franchise Tax Board telling them that unless a filing occurs the the FTB will assume that the basis is zero and asess tax accordingly.

That reminds me that when you apply for a mortgage loan or to refinance a loan, you often are asked to supply copies of recent tax returns.

If your income is so low that you don't have to file a tax return, what's the chance that you can afford to buy a home?

You can have low income but still have enough total assets earning mostly tax-sheltered income that the banks will be willing to give you a loan.

They might have a large mattress.

The example above about the $50,000 of income shown on 1099s being "offset" by $51,000 of deductible expenses is incorrect. The $50,000 is gross income and you would be required to file a tax return. Gross income is *not* reduced by deductible expenses when you're looking at whether or not a return is required to be filed.