The Consequences Of Not Filing a Tax Return

Why pay your taxes? On the surface, it’s obviously a silly question. But do you know what the consequences are if you don’t stay current with filing income tax?

Tax evasion is a serious problem for our Country. The IRS estimates that Americans underpaid their federal taxes by $345 billion in 2007. That amounts to 14 percent of the expected federal revenues.

Most of us are morally centered individuals who, even if we begrudge the responsibility, still recognize that our taxes are just that; our responsibility and even our patriotic duty.

 First, let’s define a few legal terms. Avoiding filling income tax is not the same as tax evasion. Avoiding filing income tax is when you look for ways to avoid paying taxes through legal means. Tax evasion, however, is a crime; when you don’t pay taxes that you are legally obligated to pay. Hiring an tax attorney to assist with this situation will be immensely easier than to attempt to do so on your own.

If you are guilty of tax evasion, the statute in Internal Revenue Code section 7209 clearly states the consequences:

Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.

What’s worse than not paying your fair share of taxes? Not filing income tax at all. There are too many people who evade taxes, so the authorities don’t want to put everyone of them in jail. But not filing income tax is sure to raise their ire even more than underpaying on a filed tax return. Make sure that you hire a financial attorney to assist you with this. Here are some of the consequences of not filing income tax:

Fines and interest will be assessed. You can also get prison time, more for each year of not filing income tax.

The IRS will file a substitute return for you. So you’re thinking, who cares, they do the work for me. The problem is that their return is based only on information that the IRS has from other sources. Therefore, it will not include any additional exemptions or expenses you may be entitled to and will probably overstate your real tax liability. Even if the IRS has already filed a substitute return, you can file your own return to make sure you take advantage of your exemptions and deductions. The IRS should adjust your account to reflect those correct figures.

Once the tax is assessed, the IRS will start the process of collecting. This can include placing a levy on wages or bank accounts or filing a federal tax lien against your property.

The plaintiff, aka Uncle Sam, has to prove that you knowingly tried to evade paying your taxes. If they do, the long and short of it is you stand to lose a lot more than you “saved” by not filing a return. Plus, prison is always a possibility.

If that sounds bad, be thankful you aren’t a resident of China, where tax evasion can lead to the ultimate punishment - death.