Jun 24, 2008

Willful Failure to File?? Remember Al Capone???

So if you think not filing your tax return is a good idea, think again. One of the earliest and most famous non-filers, Al Capone, tried this and it was a slam dunk (he underreported income in 1924-1927 and did not file for 1928 and 1929- interestingly, the first counts were felonies and the last two are misdemeanors).

Now, you are probably not as notorious as Al Capone, but the IRS is coming after you. The 2001 IRS "Tax Gap" study specifically cited non-filings as a serious non-compliance area that the IRS will aggressively pursue. In fact, the IRS estimates that its automated non-filing program produces a 14:1 return on investment- an area worth investing by any agency. The IRS estimates that it will secure 90,000 returns this year alone based on its "refund-hold" non-filing initiatives. One wonders if the "tax stimulus" incentive was not a ploy to pull out non-filers.

In fact, the IRS has almost 4 million taxpayer delinquency investigations ongoing. In 2006, they assessed over $23 billion on these delinquent return activity.

What is the penalty for filing late? Answer: civil penalties are up to 22.5 % (with failure to pay it is 25% in total as the FTP penalty adds .5% per month for the five months the FTF penalty is assessed. The penalty is assessed only if there is a balanced owed on a return. However, if the IRS files for you (i.e. a "Substitute for Return" or "SFR")- you will be assessed based on the worst possible scenario: the least advantageous filing status, all income without deductions, and only yourself as a dependent. Most times, this leaves you with a tax debt - one the IRS will collect on without remorse.

If you have unfiled returns, the best method is the proactive one - filing before you are asked to follow - or worse yet - "enforced" to file. Willful failure to file is a criminal offense - subject to the maximum 1 year in prison per violation (section 7203 of the Internal Revenue Code). Ask Wesley Snipes - he knows about it.

If you have unfiled tax returns, consult a professional - and file them accurately and IMMEDIATELY. Do not end up like Willie Mays Hayes - "Runs like Hayes, goes to jail like Capone."

1 responses:

Diane,  July 2, 2008 at 11:32 PM  

Hi Jim, Great article ! Always good to catch "those" more fortunate than others.

  © Blogger templates The Professional Template by Ourblogtemplates.com 2008

Back to TOP