Filing Taxes

[ResettingComp]

My friend has been employed off and on since he was 17 (back in '01) and says that every year his father’s tax guy would say that [my firend] didn’t need to file taxes because he made less than x amount in that given year and was a dependent.

Now my friend thinks he was screwed out of a lot of money by not having filed all those years as he just filed this year, and even claiming a “9” exemption, received back $330. He was asking me whether or not it was possible to file for those previous years and whether he’d get in trouble for not having filed all those years.

I didn’t really know what to tell him but I told him I’d look into it. So here goes my “looking into it”. Any info SDopers?

[RetroVertigo]

I’m not a tax expert (or novice for that matter) but if i recall you have three years to refile your taxes

[robby]

First, your friend should review his W-2 forms to see if he had any taxes withheld during the years in question. In fact, I’m surprised he didn’t do this at the time.

Second, if your friend was truly not required to file because he made so little money in a given year, there is no penalty for filing late to get a refund that he was due.* However, if enough time has elapsed, you cannot file for a refund that were due.

*However, in general, if you are required to file, even if you are due a refund, there are penalties for failing to file a return.

Disclaimer: I’m not a tax expert.

[robby]

I was apparently mistaken in my postscript above. According to this IRS web page, there is no penalty for failing to file if you are due a refund, even if you are required to file. However, you only have 3 years to file to receive a refund that was due.

@Internal Revenue Service

There is no penalty for failure to file a tax return if a refund is due. But by waiting too long to file, you can lose your refund. In order to receive a refund, the return must be filed within 3 years of the due date.

However, further down the page it states that:

@Internal Revenue Service

Taxpayers who continue to not file a required return and fail to respond to IRS requests for a return may be considered for a variety of enforcement actions. Continued non-compliance by flagrant or repeat nonfilers could result in additional penalties and/or criminal prosecution.

[ResettingComp]

Thank you very much Robby, I’ll make sure to forward this link to him.

Although, I think that section that refers to potential punishment for not filing when repeatedly requested to do so by the IRS only applies after receiving some sort of formal yet stern letter from them. Wouldn’t you agree? Or am I reading that incorrectly.

As a follow-up, is there a special form he needs to file or just another W-2 with the year he’s filing for filled in there at the top. I couldn’t find that info on the FAQ on that IRS website. :smack:

[Hello_Again]

There’s something I’m not clear on from your post. Is he currently claimed as a dependent on anyone else’s taxes? (mom, dad, stepparent, whatever).

If he is not claimed as a dependent now, but was in previous tax years, that probably explains why he would not have made a significant refund before, but would now. IME, being claimed as a dependent pretty much eliminates any chance of a tax refund (at least, when income is low >10k/year. I have no idea how the IRS treats a “dependent” that is making a living wage.).

[robby]

@ResettingComp

Thank you very much Robby, I’ll make sure to forward this link to him.

Although, I think that section that refers to potential punishment for not filing when repeatedly requested to do so by the IRS only applies after receiving some sort of formal yet stern letter from them. Wouldn’t you agree? Or am I reading that incorrectly.

I agree with your interpretation of that paragraph, with one caveat–the link at the end of the paragraph in question leads to another page with the following:

@Internal Revenue Service

The IRS is taking enforcement steps for those who repeatedly choose not to comply with the law. IRS employees will prepare returns when taxpayers do not file. The returns prepared by the IRS might not give credit for deductions and exemptions a taxpayer may be entitled to receive. Bills will be sent to those taxpayers for the tax due, plus penalties and interest.

I’m pretty sure I don’t want the IRS preparing my return. Plus, even if you are owed a refund, they may apparently prepare your past-due return in such a manner that you actually owe money, with the attendant penalties and interest.

In any event, if you are truly not required to file, none of this is an issue, other than loss of excess withholdings. See here for filing requirements for 2005.