I worked with a guy for years who never filed a tax return. We worked for a rather large company and I always figured my deductions so that I would get a small amount back from the fed each year. My friend did the same. Last year he confided in me that he had never filed a return, "Guess I'm just too lazy" he told me. and "I always do enough deductions so that I would not owe anything at the end of the year" He said. He was just wondering if there were going to be any repercussions for NOT filing even thought would have been owed a return if he had. I told him I couldn't see how the Fed would come after him for not filing when they already had more than he was supposed to have paid for the year.....Would they?
If one never files taxes
Dec 13, 2015
14 Replies
Would they? Probably not. Could they? There are civil and criminal penalties for failure-to-file. The civil penalties are mostly related to the amount of tax not collected, but the criminal penalties might apply if there was only a filing requirement, not a payment requirement.
I decline to comment on the probability of prosecution; even if I knew anything about it; Circular 230 tax preparers are not allowed to recommend violating tax law, even without an accountant-client relationship.
-- Arthur L. Rubin CRTP, AFSP in Brea, CA
He's probably legally required to file. The IRS has selection criteria for initiating a taxpayer delinquency investigation ("TDI" - the process which would cause IRS to come looking for his returns). The three dozen or so selection criteria codes have been redacted in the online versions of Document 6209
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Historically, however, one reason not to initiate a TDI has been "No Balance Due" - income and withholding information submitted by employers and other payers indicates the return, if filed, would show net tax due less than or equal to zero. The IRS figured out long ago that it is not cost efficient to chase taxpayers to get them to file refund returns. If your guy isn't concerned about meeting his legal obligation to file, there are other reasons to do so. Some that come to mind include claiming refunds of over withholding, and having valid copies of returns to support mortgages and other loan applications, federal student loan applications, and income-based state and local tax exemptions.
I once worked with a guy who got convicted of tax fraud for telling a client, "We have a reasonable legal basis for your taking the deduction, though if it ever comes to court we will probably lose."
It seems to me that unless his financial situation is really simple (just wages, no investments, few deductions) he would have to fill out the forms for himself, so he would know how much to set his withholding to. So he could show those forms to the mortgage company, etc. -- how would they know that he never actually filed them?
For that matter, what stops you from showing a completely bogus tax return to them (other than your signature claiming that you've provided truthful information)?
That's why I said "valid" copies. I once was looking at bank loan records trying to establish a non-filer's income and found copies of professionally prepared returns for several of the unfiled years. The banker didn't know they hadn't been filed or paid. Many mortgage companies now require IRS transcript verification of filing.
Any competent lender would ask for a signed 4506 or 4506-T which allows the IRS to release a copy or transcript of the return filed with them.
Ira Smilovitz
sounds like he DIDN'T have a reasonable legal basis.
Whenever I've applied for a mortgage, I've had to give the lender 2 years worth of 4506-T's (Request for Transcript of Tax Return). I'm not sure if they always order them, but they at least have the ability to check that the return you gave them matches the one you filed.
"paultry" wrote in message news:n4l3uk$7b9$ snipped-for-privacy@dont-email.me... That's why I said "valid" copies. I once was looking at bank loan records trying to establish a non-filer's income and found copies of professionally prepared returns for several of the unfiled years. The banker didn't know they hadn't been filed or paid. Many mortgage companies now require IRS transcript verification of filing. ============ Only "now" require? When I took out a loan in 1990, I had to sign an IRS Form 4506 to allow the bank to verify my tax returns. That's 25 years ago. If you know of a bank that wasn't doing the same thing back then and only doing it now, you should question whether doing business with that bank is a good thing, depending on the nature of your business with them, for they certainly weren't doing their due diligence....
How long does it take the IRS to provide copies upon the filing of such an authorization?
It can be as quick as instantaneously, if the 4506-T is submitted electronically.
Ira Smilovitz
Well, the 7th Circuit Court of Appeals agreed with you.
While the taxpayer may have a reasonable basis for not filing, there is a hidden penalty for not filing - the IRS does not credit your Social Security account with FICA and Medicare funds. I know with certainty that that was true in the early
80's. So, unless the Rules & Regs have changed, the taxpayer is S.O.L.!Dick
---- Richard D. Adams, CPA (Inactive)
While the taxpayer may have a reasonable basis for not filing, there is a hidden penalty for not filing - the IRS does not credit your Social Security account with FICA and Medicare funds. I know with certainty that that was true in the early
80's. So, unless the Rules & Regs have changed, the taxpayer is S.O.L.! =========== FICA: That is true when it comes to self-employment.A non-filer will still get credit for employment reported on a W-2 because those are filed directly with SSA.
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