IRS Tax Non-Filers

If an individual or business fails to file their tax returns for any given taxable year, they are considered to be non-filers and are in violation of US Tax Law.  The consequences for not filing a tax return can be quite serious and may include both criminal and civil penalties.  If you have failed to file a tax return, your best option is to consult with a tax attorney to find out your options.  Taking proactive steps to correct a tax filing problem could yield significant benefits when it comes to the penalties that the IRS will impose, and those which they will be more lenient on.

Does the IRS Catch Non-Filers?

Yes, the IRS has multiple systems in place which allow them to find non-filers, generally within a couple of years after the tax return should have been filed.  The IRS has implemented a software system called Information Returns Program (“IRP”) that allows them to better identify non-filers.  The system works by connectingW-2 wage statements and 1099 income reports from the employer or people who paid the individuals during that year.  The IRS completes the connection my matching the W-2 and 1099 information with the tax returns of people that filed in that particular tax year.   When there are discrepancies in the reports, the IRS can identify people who were paid a wage and who failed to file their income tax to report it.  While the process can be slow and delayed by two to three years, the IRS generally does catch up.  If you should have filed your taxes and failed to do so, you should consult an attorney to discuss your options and possible courses of action to rectify the problem.

Penalties for Non-Filers

Penalties for non-filers can range from civil monetary penalties to criminal fines and even imprisonment.  In certain circumstances, criminal charges against a non-filer may be brought so long as the action is brought within six years of the due date of the tax return.  Non-filers can be fined up to $25,000 per year and may also be put in prison for one year for each year of non-filing.  For civil penalties, the punishments for non-filers include holding the non-filer accountable for all of the accrued interest on the total tax amount due for the full period of time for which they are outstanding.  It is important to note that while criminal consequences are generally limited to a 6 year filing period after the date of non-filing, civil penalties can accrue indefinitely.

Time Limits for Filing Errors

Once an individual realizes that they have made a tax mistake, such as non-filer status, that individual should act quickly to remedy the situation.  Often times, the IRS is willing to reduce or sometimes even eliminate certain tax penalties or negotiate a lower accrued interest rate with the non-filer if the taxpayer can show some sort of reason for the delay or non-filing, or if the taxpayer actually received written advice from the IRS was incorrect or mislead the individual into believing that filing was not necessary.  The faster an individual acts to rectify the tax filing discrepancy, the more favorably the IRS will generally look on those individuals.

Getting Legal Help

A good Tax Attorney can be instrumental in negotiating a settlement or working out terms to keep non-filers from suffering as a result of their tax misstep.  It is important to contact a lawyer who specializes in tax law in order to get the full benefit of the legal expertise available.  While any licensed attorney in a specific jurisdiction can technically handle a tax case, non-filers are well-advised to seek the guidance of an experienced tax attorney for their tax issues.