Failure to File Penalty

[Rick]

According to the IRS website:

"The Failure to File Penalty applies if you don't file your tax return by
the due date. The penalty you must pay is a percentage of the taxes you
didn't pay on time."

This statement assumes you have not paid taxes on-time. What happens in a
case where a person pays their taxes on time each year but simply chooses
not to file a return?

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[paultry]

On 04/07/2022 18:18, Rick wrote:
> According to the IRS website:
>
> "The Failure to File Penalty applies if you don't file your
> tax return by the due date.  The penalty you must pay is a
> percentage of the taxes you didn't pay on time."
>
> This statement assumes you have not paid taxes on-time.
> What happens in a case where a person pays their taxes on
> time each year but simply chooses not to file a return?

Well, money-wise, nothing. Unless. The IRS doesn't know
all tax has been paid until the return is filed, so they may
come looking. Or the case may find its way to the
substitute for return program where the IRS may determine
the taxpayer owes more than he/she thought, and penalties
will apply. Self-employed taxpayers will be giving up their
social security credits if they don't file. Assessment
statutes don't start running until the return is filed.
Mortgages and school loans may be hard to get without proof
of filing.

https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&ved=2ahUKEwj-kPjAlIP3AhWWm2oFHcRMCawQFnoECBYQAQ&url=https%3A%2F%2Fwww.irs.gov%2Fpub%2Firs-news%2Ffs-08-12.pdf&usg=AOvVaw2tkO-pt-Bdc-nXF7ss8mlJ

[John Levine]

According to Rick <ri...@nospam.com>:

>This statement assumes you have not paid taxes on-time. What happens in a
>case where a person pays their taxes on time each year but simply chooses
>not to file a return?

26 USC 7203 says that failure to file or pay is a misdemeanor, with a
fine of up to $25K and a year in jail. That is separate from the civil
penalty for failure to pay.

But it's hard to see why they would bother if they don't think you owe anything.

--
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John Levine, jo...@taugh.com, Primary Perpetrator of "The Internet for Dummies",
Please consider the environment before reading this e-mail. https://jl.ly

[Rick]

"paultry" wrote in message news:t2nv3c$rf0$1...@dont-email.me...

>
>On 04/07/2022 18:18, Rick wrote:
>> According to the IRS website:
>>
>> "The Failure to File Penalty applies if you don't file your tax return by
>> the due date. The penalty you must pay is a percentage of the taxes you
>> didn't pay on time."
>>
>> This statement assumes you have not paid taxes on-time. What happens in
>> a case where a person pays their taxes on time each year but simply
>> chooses not to file a return?
>
>Well, money-wise, nothing. Unless. The IRS doesn't know all tax has been
>paid until the return is filed, so they may come looking. Or the case may
>find its way to the substitute for return program where the IRS may
>determine the taxpayer owes more than he/she thought, and penalties will
>apply. Self-employed taxpayers will be giving up their social security
>credits if they don't file. Assessment statutes don't start running until
>the return is filed. Mortgages and school loans may be hard to get without
>proof of filing.
>
>https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&ved=2ahUKEwj-kPjAlIP3AhWWm2oFHcRMCawQFnoECBYQAQ&url=https%3A%2F%2Fwww.irs.gov%2Fpub%2Firs-news%2Ffs-08-12.pdf&usg=AOvVaw2tkO-pt-Bdc-nXF7ss8mlJ

I understand the case where the IRS has somehow determined that the taxpayer
owes more than he or she thinks. But I'm talking about a case where the
taxpayer correctly determines how much tax they owe and then makes sure they
pay that exact amount each year through a combination of appropriate
withholding and/or estimated tax payments throughout the year followed by
payment of any net balance owed by April 15th.

Why would anyone do this? I don't know - perhaps to make a statement or
because they have deep-rooted disagreements with the tax system or maybe
just to mess with the government in a small way.

--

[paultry]

On 04/08/2022 09:42, Rick wrote:

>
> I understand the case where the IRS has somehow determined
> that the taxpayer owes more than he or she thinks.  But I'm
> talking about a case where the taxpayer correctly determines
> how much tax they owe and then makes sure they pay that
> exact amount each year through a combination of appropriate
> withholding and/or estimated tax payments throughout the
> year followed by payment of any net balance owed by April 15th.
>
> Why would anyone do this?  I don't know - perhaps to make a
> statement or because they have deep-rooted disagreements
> with the tax system or maybe just to mess with the
> government in a small way.
>

The IRS doesn't know all that the taxpayer knows until
he/she puts it on a tax return, and signing that return puts
the taxpayer on the record that his/her calculations are
true and correct. Drafting a return to determine the bottom
line, and paying what's owed, would logically lead to filing
the return. Why would your hypothetical taxpayer do
otherwise? Your suggested answers are as good as anyone's.

[BignTall]

The statute of limitations doesn't start until the tax return is filed.
If the taxpayer doesn't file, they give the IRS as long as the IRS
chooses to deal with the taxpayer and the missing return. Does this
taxpayer keep all his supporting documentation for his tax returns forever?

If the taxpayer did make an error and overpaid taxes for the tax year in
question, that refund will be lost if the return is filed more than 3
years after the original due date

Estimated taxes and/or withholdings would have generated a credit
balance at the IRS for that tax year. Eventually, they will send out a
CP80 notice informing them about the credit balance and asking for the
tax return to be filed. If they also ignore this, the credits will
eventually be forfeited. If the IRS ever digs itself out of the current
backlogs, they may finally get around to filing a substitute 1040 for
the tax year after the credits were automatically forfeited. That
computer generated letter may well demand the taxpayer pay the tax
again, plus the failure to file penalty, plus the failure to pay penalty
and years worth of interest. With a considerable amount of time and
possibly some expensive professional help the taxpayer may or may not be
able to reduce or eliminate the bill. To me, this scenario seems
unlikely but it appears to be a totally avoidable risk.

To me, not filing the return seems simply dumb.