Mainly interested in responses about United States law…What if somebody just up and said
“i hate paperwork, I’m never filing a return again, I’ll just wait until the IRS sends me a letter saying what I owe and pay that.”
Technically they aren’t evading taxes, just making the IRS do all the work.
You’ll owe your tax AND a penalty. I like to keep my extra cash.
I suspect, if US law is anything like UK law, that your obligation is not just to pay taxes, it’s to file tax returns at their request. So if you don’t fill one in, you are breaking the law, and subject to penalties as a result.
I often hear about US citizens being obliged to file tax returns even if they no longer live in the States, and don’t owe them money.
So whilst you aren’t necessarily going to be charged with tax evasion (which is a deliberate attempt to avoid tax by hiding taxable earnings), you will be charged with failing to comply with tax law.
IANAL, but
Cite.
SO AFAICT yes, not filing is tax evasion if you owe taxes. If you don’t owe, you don’t have to file although it is usually a bad idea.
Kind of an expensive way to avoid paperwork.
Regards,
Shodan
If you don’t owe, there’s no penalty. My now-wife hadn’t bothered to file for several years before we met. I helped her catch up with the paperwork, and she received several hundred dollars in refunds, since withholding had been more than enough.
Even if you don’t owe it is an offense not to file (if your income is above a statutory minimum). As a taxpaying Canadian, I still have to file every year even though I am nowhere near owing anything. One thing I do that is probably illegal is report all capital gains as ordinary income since I cannot be bothered to fill in the capital gains form. The worst part of this is the FOOBAR report since it has to filled out online and is highly repetitive. Exact same info appears many times on the form and has to be typed in every time. It takes the better part of a day and for what? I am sure no one ever looks at it.
Since you’re in Canada, I assume indefinitely, why bother? I am asking out of ignorance not snark.
This is true, but the IRS–in practice–doesn’t go through the motion of making criminal charges unless there is a clear indication that someone is making a determined effort to never pay money they otherwise owe–that is, to defraud the government. If someone is just overdue, it’s easier for them, and better ROI, to assess penalties and leave it at that.
As I understand it from previous discussions, the actual punishable offense is not paying taxes. I’m trying toimagine a court case where the prosecutor says “your honor, this person failed to file for refunds and has left the IRS holding the bag for hundreds of dollars, most of which he can no longer claim.”
The problem with letting the tax department tell you what you owe is that they probably do the minimum calculations - ignore any deductions that they don’t know about (i.e. charitable, and mortgage deductions, etc.) So you will end up leaving money on the table. This probably also applies to capital losses that can be applied against other deductions. And the risk is that the IRS in their calculations may not be aware of income, such as if you sold your house (which I understand is taxable in the USA), or if you have unusual sources of income. Miss those, end up with the IRS owed money, and now penalties and criminal charges may apply.
Plus - do they normally send you a bill? AFAIK, for us standard wage slaves, the tax department gets your pay slip deductions. Thus, you’ve paid your taxes. It would only be if you came to their attention, if your name pops up on the computer as being in arrears, that they would be doing a calculation and sending a bill. By then, you have at least missed the deadline (by definition, no bill until the deadline is passed?) If you are late, you owe penalties. Presumably the IRS has better things to do that try to prosecute criminally people too lazy to do their taxes. If you are someone who can afford to pay twice the normal taxes then maybe penalties will be OK.
I assume too the IRS is like Revenue Canada - if you end up owing at the end of the year too much, they will then demand you do quarterly (or if large enough, monthly) personal assessments an payments. This is typically for self-employed and others whose income is not normally pre-deducted.
U.S. v. Hairston, 819 F.2d 971 (10th Cir. 1987).
Richard P. Hairston wanted to produce evidence at his trial that he would have received a refund had he filed. The trial judge disallowed it. The appeals court said the trial judge acted properly.
There is a movement to have the IRS just bill you or send a refund. For most people, they have all the information they need, so tax forms are unnecessary.
Tax preparer companies have done everything they can to prevent this.
All three of my children live in the US, so I don’t want to possibly be arrested or something. I also find it convenient to have a bank account there and don’t want to see it confiscated.
Also note a recent CNBC article that the USA is planning to implement a policy to deny/revoke passports of tax delinquents. Considering that to enter the USA, as I understand, you must present your American passport, even if you are also a citizen of another country, this alone would pretty much rule out a lot of travel. (And often the best deals to fly anywhere involve a USA stopover from Canada)
In the United States at least, failure to file a tax return (assuming that you have taxable income) is a misdemeanor whether you owe tax or not. In practical terms, obviously, it’s uncommon for prosecutors to go after people whom they have no reason to believe owe anything, but it could happen.
In one heavily publicized case in Illinois in 1972, Harold Washington, then a state Representative, was prosecuted for failure to file tax returns for four years and served a month in jail, even though he owed only trivial amounts of tax in total and for at least some of the years I believe owed nothing. Washington’s case wasn’t exactly typical–he was a politician, there was a lot of outrage over newspaper stories about how state legislators who write our (state) tax laws couldn’t be bothered to file their own returns, he was a Democrat facing a Republican prosecutor looking to score political points, and he had been an especially egregious offender who didn’t file for at least 19 years although most of them were beyond the statute of limitations. But the point is, it can happen.
The actor Wesley Snipes was also convicted of, and served prison time, for failure to file. His case was more typical in that he also owed money, but he was only convicted of failure to file and served time on that charge alone.
Really all they should do in that case is to take the form, sign and date it with nothing else filled in and send it in. From that point on, you have filed.
Are you a tax attorney?
I’m not a tax attorney, but I am a CPA. And I have taken a course not normally taken by CPAs in IRS practice and procedure.
The technique of filing a return with zeros everywhere has been determined to be a legitimate return. However, it has an extremely high likelihood of being audited, because the person filed the return for no good reason since their income did not meet the statutory minimum to file and they had no withholding to claim. But in these days of IRS budget cuts, it’s always possible they’ll decide people who filed actual returns with numbers on them will likely have more to go after than someone who filed a zero return.
As to the actual question in the OP, if you know you should file a tax return and you don’t, then that’s willful failure and tax evasion, which is a crime punishable by jail, not just civil penalties. However, in order to be convicted for tax evasion, the government needs very good proof that you knew you owed money and took steps to prevent paying it. If you simply claimed you didn’t know that you needed to file your taxes, and stuck to that story with enough conviction, you might get away without criminal penalty.
Keep in mind that there are plenty of civil penalties associated with failure to file your taxes (though they are based on the amounts you owe), and the statute of limitations does not start until you file your return. Thus, people trying to evade will file returns with all zeros and hope the IRS doesn’t have time to come after them and in a few years, the tax debt will be wiped out (6 I believe, assuming a zero return grossly understates your income, as the statute of limitations is normally 3).
If you’re not filing your taxes because you can’t be arsed, and you have a regular job in a one-income household and no outside income, you’re being generous to the rest of the taxpayers by paying more than your share. At least, up until last year. See, it used to be that the tax withholding guidelines were designed to slightly overwithhold so that more people would be due refunds than owe money assuming their withholdings were accurate, which encouraged people to file returns. With the overhaul of the tax law, it was decided to end this practice, and instead aim for equal numbers of people being over- and underwithheld. What this meant was that a lot of people who always got refunds ended up owing, and they weren’t happy even though they received more money in their paychecks throughout the year.
What is this “extra cash” thing of which you speak and how do I sign up for some?
I don’t think the IRS will ever send a letter saying how much you owe to start the discussion… I think you will get a letter telling you you may be delinquent and inviting you to prove otherwise or possibly come in for a visit.
I believe all first world countries will have similar tax laws. If you don’t file a return, even if you owe nothing or would be owed a refund, that negligent act alone is a crime.
In my 20 plus years of filing taxes Norway moved from:
All paper
Electronic filing
Electronic filing mostly pre-filled (I stopped a brief stock trading hobby because of the hassle of having to figure out my tax liabilities, which were not pre-filled at the time)
Electronic filing, 99 percent pre-filled for your average wage earner and, relevant to this post, implied filing.
So today, if you don’t file any changes, you’ve given implied acceptance of the pre-filled version.