The IRS has a special name for people who don’t file tax returns: Nonfilers.
To file or not to file, this is one of those good news/bad news questions.
The bad news: If you owe taxes and do not file a tax return, it is a crime. You can be fined up to $25,000 per year and/or sentenced to one year in prison for each unfiled year.
The good news: The IRS does not usually pursue a nonfiler after six years from the filing due date.
Sort of good news: If you owe taxes and file your return but do not pay them, there is no criminal penalty, but your unpaid taxes will be assessed penalties and interest.
There are no deadlines on civil penalties. Penalties and interest can be assessed forever on back taxes.
The IRS has come up with a variety of ways to find nonfilers, including:
The Computerized Information Returns Program.
This program matches tax information documents against tax returns you have filed. If no tax return is found, the IRS initiates a Taxpayer Delinquency Investigation. You will receive notices from the IRS, then phone contacts or more letters, and finally a revenue officer might start looking for you.
The IRS has four different ways to notify nonfilers. If you do not respond to one method, the other methods will be tried:
- Written request from the Service Center. You will receive three notices within a 16 week period.
- Phone call or letter from a taxpayer service representative. At this time, you will be given a deadline to file your tax returns.
- Call or visit from a revenue agent or officer. You will be given a deadline to file your returns with the officer or they will offer to help you prepare your returns. If you still do not file your returns, the IRS can legally prepare them for you.
- Visit from a special agent. If this happens, it means you are subject to a criminal investigation.