Person has taxes taken out of payroll(max) but didn't file taxes for 6 yrs What can happen to that person?IRS?

Question

Payroll dections taken but the person did not file Income Taxes for 6 yrs. What legal issues, penalties, IRS problems, or other concerns might this individual expect to encounter when coming forth to make the wrong ... right..on the up and up.??

Answer 1

See above for the disclaimer about consulting with a licensed attorney or tax professional.

I know a couple of people this happened to. The amusing thing about the IRS code is that filing the tax form is official listed as voluntary, but they can still penalize you if you don't send it in.

What will most likely happen (as it did to the people I know) is that the IRS will do the assessment, and send you a letter saying you own $X amount of money, in some combination of unpaid taxes, interest and penalties. If you pay the amount, and have committed no fraud along the way, that generally ends the matter.

You can also pro-actively address the situation by contacting the IRS, saying that you realize you haven't filed, and ask them to do the assessment. They typically send you a letter with the numbers for each of those years, and you plug those in to the forms. My friends' tax consultants told each of them to use whatever numbers the IRS gave them, without modification.

There are several criminal charges that they can go after people with, if they are feeling mean and if there is no attempt at cooperation. At one end (felonies) are 26 USC 7201, willful tax evasion, and 26 USC 7206, tax fraud. At the low end of the spectrum is 26 USC 7203, willful failure to file a return or willful failure to pay taxes (a misdemeanor). See link below for statutory definitions.

Generally, I've noticed that a good faith effort to correct the problem only results in monetary penalties, not criminal charges. But you should consult with a licensed attorney whenever your legal rights and obligations are at issue.

Answer 2

The legal issues are,
1. you are required to file unless you make a really tiny amount of money so technically you are breaking the law.
2. if you owe money then you could be changed with tax evasion

As a practical matter though, if you don't owe the IRS then they won't do anything. And if you had taxes taken from your paycheck you may not owe anything. But you can only get a refund for the past two years. So you have forfeited 4 years of tax refunds. That's just dumb.

If you do owe them money then penalties and interest will pile up. Better to get it taken care of as soon as you can. As for the tax evasion, that won't be a problem if you come to them and get it straightened out.

Answer 3

Well the fact that you are coming forward to right a wrong is a positive thing. This type of case usually fall under tax-evasion but since you actually paid taxes via payroll deduction and just failed to file your annual taxes it would only result in penalt fees and interest. That's providing you owe taxes. If you are owed taxes then you may be entitled to a refund.

I don't know what the statute of limitation on filing taxes are. Your best bet is to seek the advise of a licensed tax professional or you can contact the Federal or State tax office directly and they would give you free advise. Don't worry they are not going to arrest you for calling in. I have had questions in the past and called them directly and was surprised at how receptive and professional they were.

Answer 4

That all depends upon the amount of money you made for the 6 years. You do not have to file a tax return, if under that amount. It was $25,000 the last time I checked. Don't stir up a can of worms. The IRS normally doesn't audit after 3-4 years, unless you've been reported for tax evasion, and they can go back forever. But, they are undermanned, so don't worry unless you get a letter from them. Chances are............you won't.

Answer 5

It depends whether that person owes money or if they had a refund coming. If they had a refund coming, then absolutely nothing. In fact, you can still file those forms and receive back refunds.

However, if you owed and have not filed, the IRS can assess penalties and fines, garnish wages, put a lien on your house, and basically make your life miserable.

Answer 6

That person will be caught. The company he/she works for has to file their papers with the IRS and it shows that he/she made that money. If that person did not file for 6 yrs then they owe 6 yrs back taxes. My brother did not pay his taxes for 5 yrs and the IRS has taken his bank account and they had to file bankruptcy. PAY YOUR TAXES.

Answer 7

Get a good tax attorney. Tax attorneys usually have worked for the IRS and have inside information about reasons/excuses and how to cloak them. It will be money well spent. You will have penalties and back taxes to pay and attorney fees.

Answer 8

Consult with IRS directly or consult with an attorney to represent your concern. There's no competent advice you can receive here on Yahoo for that kind of (potential) problem.

Answer 9

HUH! Did you not file a return for all that time?
And all the other employees?

Did no one receive a pay stub itemizing the deductions?

Did no one receive a W2 each January?

Did you not think that was strange?

Did you think that you should have filed a return and didn't you have any curiosity?

The other guy may see jail time.
No idea, if you filed no returns.
Geezzz.

Answer 10

In the US, the IRS will eventually catch up with that and that person will be in hot water. They will obtain info for those years and if they find that person owes any money to them, they have no problem at all with freezing bank accounts and garnishing wages earned.