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Failure to File

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Do I have to file and pay federal income taxes?

Generally, the rule of thumb is that if you have income from any source derived, then you are required to file and pay taxes. However, at the federal level, your filing requirement, whether you have to file a return is based on your filing status, age, and income level. Thus, if you do not have income greater than the standard deduction, you will not have a filing requirement. For instance, if you are single, under age 65, and earn less than $12,550, then you do not have a filing requirement. The level of income necessary to be required to file increases with age, and with a change in filing status, i.e., Married Filing Jointly, Head of Household, etc.

Similarly, in the State of California, generally, if you are required to file a federal tax return, you also are required to file a State of California income tax return. In addition, like the federal level, threshold depends on dependents, age, and income. Furthermore, your requirement to file and pay California income taxes also applies if you are resident, including part-year resident, and even if you are a nonresident, but have income from a source in California.

What are the penalties for not filing your taxes?

At the federal level, the failure to file penalty depends upon whether you have a balance due on your return. The penalty applies when a taxpayer fails to file income taxes when due. The calculation of the penalty is five (5%) of the balance due for each month or part of the month that the tax return is late, from the due original due date, not the date of extension. However, the penalty does not exceed twenty-five (25%) of the unpaid taxes. In addition to the penalties due on the balance, interest accrues the on the tax due beginning on the due date as well. In California, the failure to file penalty follows the federal, except that the maximum penalty may be higher if the failure to file is due to fraud. The minimum penalty in California for individuals is $135 or 100% of the tax due on the return.

What enforcement options does the IRS and California have if taxpayers who fail to file their taxes on time?

The IRS and California can assess civil and criminal penalties depending upon the nature of the taxpayer’s failure to file. Civil penalties can have significant consequences for taxpayers. For instance, the IRS and California may levy bank accounts or garnish wages. In addition, the IRS and California can seize property of the taxpayer. Furthermore, in order to help in its collection efforts, the IRS can even issue summonses to persons with information about preparation of unfiled tax returns.

As for criminal tax penalties, the IRS and California can pursue criminal tax enforcement for willful failure to file tax returns. For instance, if a taxpayer attempts to evade of defeat a tax, they can be charged with a misdemeanor. However, if the IRS can prove that the taxpayer committed an overt act, the penalty can be increased to a felony. A taxpayer convicted of a misdemeanor failure to file tax returns can be sentenced to up to 1 year and fined up to $25,000 ($100,000 for Corporations. Meanwhile a felony conviction can carry a sentence of up to 5 years, and a fine of up to $100,000 ($500,000 for Corporations). Thus, failure to file and pay taxes can have significant financial consequences as well as criminal punishment.

If you fail to file tax returns, the first thing you need to do is call the Tax Attorneys and CPAs at the Tax Law Offices of David W. Klasing, P.C., to advise you of your rights and how to navigate dealing with the IRS. In addition, you need to do is seek to get in compliance with tax responsibilities, and then to seek to resolve your delinquent tax liability. Finally, there are settlement options that may be available. Find out more information about your options when you have failed to file tax returns, by contacting the dual licensed Tax Attorneys and CPAs at the Tax Law Offices of David W. Klasing, P.C.

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