Exactly How Serious is Failure to File Your Tax Return?

looking at tax returnHow troublesome is it if you fail to file your annual tax return, or your quarterly business taxes? This is not a trick question. The answer is, “it depends.”


If you do not owe any taxes, there is no penalty or fine for not filing a tax return. If you do not file though, you are also not eligible for any refund you may be due. The Internal Revenue Service (IRS) refers to those who do not file tax returns (whether they owe or not) as “nonfilers.”


In the spring of 2020, nonfilers experienced the disadvantage of receiving economic stimulus payments later because they were not registered with the IRS.


While late refunds and other payments to nonfilers who have no tax obligation are unfortunate, they do not contribute to the tax gap. The tax gap is that gulf between how much tax should have been paid in any tax year, and how much was actually collected.


The US relies heavily on voluntary compliance of taxpayers to file and pay their taxes. As employees, employment taxes that fund government programs are automatically withheld from your paycheck. Business owners are expected to calculate and file their taxes on time. Still, in 2019 the tax gap was $39 billion, so clearly there is a problem.


When identified, the IRS is not charitable with nonfilers who have a tax obligation that accrues due to a failure to file a return. The same thing holds for actual taxes owed on a fraudulent tax return. In the case of a false tax return, a taxpayer can quickly find themselves flirting with an allegation of tax crime.


Failing to file a tax return can quickly grow the amount of a tax liability. Taxpayers may earn a penalty for filing their return late. Even with an extension, there is a penalty for late payment of taxes owed. Combine any of the above with a false tax return and the amount of money owed goes up. Taxpayers trying to avoid paying by not filing a return can be charged with a misdemeanor or a felony. For those who simply quit paying their taxes over a number of years, an IRS criminal tax investigation can lead to federal prosecution.


The outcome of failing to file a tax return depends on a number of factors, including the skill of the criminal tax attorney retained to handle the matter. If you know you are in arrears, or are contacted by the IRS, speak with skilled legal counsel before responding to the IRS. The intervention of a good tax lawyer at any point in a tax matter can mitigate damages and lead to a better resolution than a criminal tax investigation allowed to run its course.


Speak with our legal team if you are contacted by the IRS on a civil audit or criminal tax matter

Serving international and local clients from offices in Chicago and Cleveland, Illinois, Robert J. Fedor, Esq., LLC provides aggressive representation and high-quality legal service. Call or contact us at 800-579-0997 if you are concerned about tax litigation or other tax controversy.


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