Ok, question that’s been bothering me. I have a friend who doesn’t file taxes. When I told him he was going to get in trouble, he brushed me off. Because, according to him, actually FILING your income tax is voluntary. Apparently what he does is he figures out what his taxes for the year are, claims exempt on his W-2 form and just has a set amount deducted from his check every pay period, so that at the end of the year he’s paid exactly the amount of taxes he owes (per his calculations). Now I say that he still has to file, but he refuses to budge. I emailed this question to the Straight Dope staff and they answered very nicely that he was full of himself 
I’d love to prove him wrong but he’s the kind of person who won’t believe anything unless he sees something official. He says he has the entire irs handbook in .pdf format, which is how he knows what he knows. Anyone able to help me out with some specific references to prove him wrong?
Try checking with the IRS - I’m sure they have plenty of documentation proving that filing taxes is just as voluntary as, say, paying for your purchases at the grocery store. Sure, nobody’s holding a gun to your head, but it’s really frowned upon if you don’t do it…
Page 17 of the 1040 instructions indicates who must file.
They state that a single person with income over $7700 must file a return. There are different amounts for different situations.
This is confirmed at the IRS telephone hotline – 1-800-829-4477, topic number 351, and at http://www.irs.gov/newsroom/article/0,,id=105097,00.html
What exactly does your friend cite in his behalf?
Take a look at the Tax Protester FAQ which should satisfy even your friend that what he is doing is illegal.
I believe you are obligated to file if you meet the criteria but there is no penalty for not filing if you do not owe any taxes.
Paying taxes isn’t voluntary, but filing a 1040 while not really ‘voluntary’ isn’t required in certain circumstances. IIRC if you calculate that you are either even or owed money by the IRS and don’t have any deductions or other claims, you’re not required to actually send in a 1040. Now, your friend had better make sure his calculations are correct, but he’s not neccesarily setting himself up for something bad.
Yup, there’s no penalty if you don’t owe any taxes, because the penalties are all based on how much you would have owed if you’d filed. So, as long as he pays the correct amount every year, he’ll be fine.
The Tax Protestor FAQ linked to above is a really well done resource, and this friend of yours should check it out. Two more points:
(1) In certain circumstances the IRS will simply file on behalf of someone instead of raising a stink and suing them and whatnot. Many people therefore do seem to “get away with” not filing when in reality they may even be owed a refund.
(2) All of these tax protestor arguments can be answered by the following sentence: it doesn’t matter what I or you or your friend think the law says, it only matters what the U.S. Supreme Court thinks the law says, and they are pretty adamant that the tax code was properly enacted and most people (including most likely your friend) must file a return.
I don’t see how the Tax Protester FAQ is relevant. The OP is about filing tax returns, not about paying them.
Here’s an idea for your oh-so-confident friend. Write a letter to the IRS saying that although you have taxes withheld from your paycheck, you never file a return. Say that you’re sure that’s OK with the IRS since it’s strictly voluntary. Have your friend fill in his social security number, address, and phone number, and sign it. I’m sure he’ll have no problem doing that since he believes he’s doing nothing wrong. Then stand out of the way when the auditors arrive.
It’s only voluntary in the sense that no one is physically twisting your arm to file.(Until the IRS finds out). Speed limits are voluntary until the police pull you over.
One year I failed to file a return, knowing I had a refund. The next year I included the current and previous returns without explanation. Back came my refund as normal. This experience leads me to believe the IRS is not capable of quickly tracking millions of taxpayers.
The friend is likely to eventually get caught and he will be in big trouble if/when he does.
From the FAQ:
Nothing in the Internal Revenue Code requires an ordinary citizen to file a return. (explaining why and when filing is mandatory)
Well, or not interested in it. They owed you a refund that year, so, because you filed a year late, they got to hold on to money they owed you an extra year.
I would advise your friend to file, though, even though he might not think he owes the IRS any money. First, he might be wrong, and actually owe them money, and in that case, he will end up having to pay some pretty serious penalties and late fees when they find out. Secondly, he might be wrong, and the IRS might owe him money, and you can only file a request for a refund within three years.
Well apparently he says he’s been audited before he just never shows up to the audit. Which I think is just plain stupid. He’s just asking for trouble. He says if they threaten to sue him, he’s going to sue THEM and require them to be audited. To which I say, wtf?
Is there a way to figure out how much the late fees or penalties would be? Is there an IRS guidline for this, or are all cases treated differently?
And what obligation does the IRS have to enforce penalties against non-filers in a timely fashion?
This page has a good brief overview of the relevant case law and statutes, also.
He’s going to sue the IRS and require an audit of them? Unless your friend’s name is John Ashcroft, he can’t. He has no standing to sue the IRS.
“Standing” in pravnik’s last post meaning legal standing, a very specific concept about who can and cannot sue whom. Just in case he claims “moral” standing based on being a citizen and paying in.
If he’s going to all the trouble of figuring out how much taxes he’s going to owe, why doesn’t he just fill out the return? He must have to fill one out anyway to see what his adjustable income is, after credits, deductions, etc. It’s not a simple bracket so I’ll have them take 28% out of every paycheck." If he’s doing that, he’s probably greatly overpaying, which is why the IRS doesn’t bother with him - they don’t care if you are stupid enough to never claim your refund.
I have a hard time believing someone doesn’t show up for audits and nothing ever happens. He’s going to sue the IRS? Riiiight . . . frankly, your friend sounds a little nutty.
From the instructions to the 1040
Hmmm, don’t know what happened there. The third sentence is supposed to read, “It’s not a simple matter of saying, ‘I make $X and that puts me in the 28% tax bracket so I’ll have them take 28% out of every paycheck.’”