For most taxpayers, the 2016 tax filing deadline has come and gone. The regular tax filing deadline to file one’s 2016 tax return was April 18, 2016. Taxpayers actually had an additional three days to file taxes this year because the traditional tax deadline fell on a weekend. The following Monday was Emancipation day which pushed Tax Day back to April 18 this year.
However, despite the extra time, some taxpayers still fail to file taxes. The reasons for a taxpayer’s failure to file will vary. Some taxpayers fail to file taxes because they believe that their income is too modest to the IRS or California FTB to notice. Other taxpayers may believe that they do not have an obligation to file taxes for an array of reasons. Other taxpayers may simply wish to avoid the “bad news” that completing and filing taxes will mean for one’s finances.
Unfortunately for taxpayers attempting to stay off the IRS’s radar, not filing taxes is one of the least effective means of accomplishing this goal. While some taxpayers may not hear from the IRS for the first year or two of non-filing, this type of non-compliance is extremely easy for the IRS to detect because the IRS matches forms from your employer. And furthermore, the longer the non-filing practices persist, the larger the tax problems the taxpayer will face.
What Can Happen When I Don’t File Taxes?
When a taxpayer fails to file taxes, an array of consequences can be imposed following an audit or upon conviction of a tax crime. One the less serious side of the spectrum, a taxpayer can face fines for both their failure to file taxes and their failure to pay taxes. These penalties are computed for each full month or each part of a month where the tax obligation remained unfulfilled. Depending on the amount of the tax debt, these penalties and unpaid taxes can accumulate quickly.
One of the harshest consequences a tax non-filer can potentially face is tax evasion charges. Tax evasion is a felony and carries a federal prison sentence. Normally, one cannot face tax evasion charges for failures to take action or inaction. Thus, the question taxpayers sometimes ask is, “ How can I face tax evasion charges when I didn’t do anything.”
In truth, this characterization of “not doing anything” obscures the fact that prosecutors can bring tax evasion charges against tax non-filers when there is a “last affirmative act of evasion.” Essentially, a last affirmative act of evasion is any step or act that taxpayer takes to further their non-filing scheme or conceal their failure to comply with the U.S. Tax Code. Theoretically, a taxpayer who fails to file taxes for several years and then lies about it to an IRS agent could face tax evasion charges. Other acts in concert with tax non-filing that could potentially justify criminal tax evasion charges include:
- Keeping multiple sets of books.
- Making, keeping, or presenting false financial or tax documents.
- Destroying company books or records.
- Concealing assets or income
- Any handling of one’s affairs in a different manner to avoid making records of transactions.
Simple statements regarding income, sources of income, and other factors can have serious consequences when made in the context of an audit or IRS investigation.
Handling Unpaid Back Taxes
No taxpayer wants to create new instances of legal liability. However, many taxpayers inadvertently do so when avoiding taxes because of fears about how much they owe for the current tax year or for past tax years. Instead of potentially making false statements to an agent or auditor, taxpayers should consult with a tax professional regarding getting caught up on filing and tax debt relief options. Some options to reduce the burden of tax debt include:
- Tax payment plans – An array of tax payment plans are available for individual taxpayers and small businesses. Taxpayers should ensure that their plan is reasonable and tailored to their situation to increase the likelihood that it is accepted by the IRS.
- Innocent spouse relief – This type of tax relief is most commonly sought after a divorce. During divorce proceedings, one spouse may learn that the spouse who handles taxes made a number of “mistakes.” If granted, this relief can excuse a taxpayer from liability.
- Tax appeal – If you disagree with a tax determination or ruling, you have the opportunity to file an appeal. Several appeal options are available, however, time limits on when an appeal can be timely filed requires the taxpayer’s diligence and attention.
- Offer–in-compromise – This type of tax relief is rarely granted, but can excuse a taxpayer from some or all of their tax liability. Offers that consider a taxpayer’s reasonable collection potential are more likely to be accepted.
Working with a tax professional when you forget to file can help you assess whether these or other tax relief options are right for your situation and goals.
Work with Tax Lawyers in Los Angeles and Irvine
If you failed to file your 2016 taxes or have failed to file taxes for years, the tax attorneys of the Tax Law Offices of David W. Klasing can help. Our tax attorneys can help you come out of the shadows and back into compliance with the U.S. Tax Code. We work simultaneously to mitigate the consequences you face in coming back into compliance with the law. To schedule a confidential reduced rate tax consultation, please call our Irvine or Los Angeles law offices at 800-681-1295.
