View Full Version : My cousin and the IRS: will he regret this?
01-24-2005, 12:07 PM
My cousin recently told me about a (US) tax issue that was worrying him. Iím no tax expert, and I hope that some Dopers may offer some (informal, nonbinding) advice. Hereís the story:
About 10 years ago, my cousin was a poor grad student, working as a teaching assistant at a large American university. The terms of his assistantship: a tuition waiver and a stipend of about $10,000 per year, just enough to live on. Every April he filed his 1040EZ, and every May he received a tax refund of about $600.
One year, he was awarded a fellowship with the same terms as his assistantship, but with no teaching duties or campus residency requirement. So with his thesis advisorís blessing, he took the money, moved to Italy, and spent the year attending lectures at the University of Bologna (never enrolling for credit, and never doing paid work in Italy).
But he forgot to file his 1040EZ that year. The next year, having returned home, he realized his mistake but simply carried on as if that year had never existed. He reasoned that the IRS wouldnít be too angry about not having to pay out a $600 refund. After all, he lost the $600 and made no ill-gotten gains.
In your opinion, will he ever get in trouble with the IRS for this? If so, what should he do?
01-24-2005, 12:16 PM
Yes, he could get in trouble. I did but it worked out fine in the end. I've told the long version of the story but I'll just give you the important points which apply to your cousin. Disclaimer: my story tool place in the mid-80's so things could have changed.
I had filed taxes for a few years when I had a year where I made very little and had no paycheck witholdings. As a result, I didn't owe anything and wasn't owed anything so I didn't bother to file. I didn't file that year but did file the next couple of years.
One day I got a letter from the IRS explaining that I owed a $500 fine for not filing. After a beaurocratic nightmare, the fine was waived but it was a pain in the ass. He should take care of this to save later hassle and get some cash to boot.
01-24-2005, 12:20 PM
Well, from quick Googling, it appears that the worst that could happen is that he might be subject to a penalty for late filing. The rebate is long gone -- you have a limited window to claim that. It appears that every statue of limitation associated with taxes starts once the form is filed. So until the form is actually filed, the IRS has an unlimited time to get uppity about it.
Realistically, they probably have bigger fish to fry, but it probably couldn't hurt to file a return for that tax year anyway (unless the penalty is outrageously high, which I would doubt).
01-24-2005, 12:38 PM
According to one of Cecil's columns from 1996, no prob.
For practical purposes, if you don't owe money or the IRS owes you, you don't have to file a return at all. All penalties and interest are figured as a percentage of what you owe. If you owe nothing the penalty for late filing is zero. No criminal sanctions, either. The IRS folks are pretty candid about admitting this too, no doubt on the theory that only a moron would fail to file if he had money coming back.
01-24-2005, 01:34 PM
Cecil is right but you could spend a lot of time trying to get fines waived while you convince the IRS that you really don't owe them. That's why you have to worry about it.
01-24-2005, 02:03 PM
10 years?!? No, he's safe. He can stop worrying. Although there is no true Statute on a return not filed, I know that administratively the IRS only goes back 6 years for non-filers. However- if you didn't file for many years in a row, and the last year is the one that kicks out- then they might pick up the rest.
Even if they did go after him, he'd owe nothing. No refund anymore, yes, but nothing oweing.
It is quite possible that the Great & Powerful IRS computer already figured this out, and that's why no one made contact with him. Why badger someone to file for a Refund?
Haj- there is not such thing as a "$500 fine for not filing" (well, for not filing a 1040, that is). The fine is calculated on how much you owe. However, States sometimes do this.
01-24-2005, 02:12 PM
1040[/B], that is). The fine is calculated on how much you owe. However, States sometimes do this.
I definitely got a form in the mail in 1984 or 1985 saying that I owed that much. Maybe they calculated that number based on the previous and next year. After a phone call and a letter, I got another form saying that the fee was "waived." It sure seemed like a fine to me but I could be misremembering the details.
01-24-2005, 08:00 PM
Thank you all for your replies. I'll pass on the information.
01-25-2005, 01:54 AM
If you had to "pay in" taxes when you filed in year X, then year X+1 you don't file a return, they will probably "contact" you. If you got a return in year X and don't file in year X+1, I don't think they will bother looking for you.
A friend of mine didn't file for a few years, he finally sent in all his W-2s along with a letter saying he didn't file for those years. I told him I would come bail him out of jail when they come and get him. In the end, they sent him a refund check for every year he didn't file.
It really depends on your financial situation, everyone has a different "tax" profile. For example, if the IRS notices you are depositing $5,000 a MONTH in your savings account and you claim $20,000 income for the YEAR, get ready, they're coming to get you.
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