What are the common issues that non-filers face?
Individuals and businesses file over 150 million tax returns to the IRS every year. Although most fail to meet the threshold for exemption from filing taxes, there is a huge population of people and businesses which fail to file taxes despite it being a legal requirement. Non-filers are unable to receive their owed tax refunds, and those who should be filing but do not lose this entitlement to those refunds. After three years of not filing, claims to any tax refunds become invalid. In addition, those who fail to file will likely be audited by the IRS or have financial or legal repercussions.
Despite these benefits of filing taxes and consequences for non-filers, there are still so many that fail to file their taxes. It is possible that certain circumstances can arise that may inhibit taxpayers from filing taxes such as traveling abroad, deaths in the family, or any number of obligations or crises that would place filing taxes on the backburner. Sometimes, people inaccurately believe that their income does not qualify for filing for tax refunds or it would not be deemed necessary for a tax audit or any legal repercussions. This misconception is not enough if and when an IRS agency conducts an audit; in this case, you will still be held as guilty as those who deliberately try to fraud the US government and IRS.
According to estimates from the IRS, there is a discrepancy of about 345 billion dollars between how much taxpayers should be paying and how much is actually paid. According to IRS studies conducted in the 1990s and 2000s, it is estimated that more than 10 million people and businesses did not file taxes each year. This lack of filing leads to a loss of approximately 7 billion dollars yearly, and some studies have said it can be as high as 86 billion dollars. This is no new problem to the IRS though. To combat the non-filing, the IRS made attempts in 1992 to comply with the system with the IRS Non-filer Program, which urges people to step up by:
Along with these repercussions, there are some others that negligent taxpayers may face such failure to pay or file penalties. If it is determined by the IRS or other government agencies that you deliberately acted negligent, then there may be hefty tax evasion charges or felonies involved. Tax evasion felonies can result in up to 5 years in prison and/or a penalty fine of $250,000 for the offense.
Just as individuals and businesses have three years to claim tax refunds, the IRS also has three years to audit an unfiled return. If there is greater than 25% of income that has been concealed, this time frame can be extended to 6 years to audit and penalize. However, even this time frame can be extended under the continuing offense doctrine if the taxpayer evades the taxes by leaving the US. In such situations, the time frame can extend much beyond the 6 years.
This may all seem intimidating information even for those that are lawfully abiding, taxpaying citizens. You do not need to feel afraid or nervous about an IRS audit when you have experienced professionals to help you through this process. Working with tax attorneys and CPAS such as Spodek Law Group can help you with your non-filing tax problems. The Spodek Law group is experienced in resolving filing back tax returns and reducing the repercussions of compliance. For a consultation, please contact our firm for more information.
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