The Tax Non-Filer
Tax filing season which these days runs from January 1
through October 15 is a time of real suffering for some people. All the
advertisements about getting tax refunds and using the found money for lots of
things that one enjoys only makes things worse. For these people it is more
sleepless nights, sweaty palms and upset stomachs that can be triggered by the
most off hand remark. A coworker or friend mentions having gotten their juicy
tax refund early. Dizziness, depression, anxiety follow. These are the
hallmarks. This is the plight of the tax return non-filer.
Like most of our human problems the non-filer has put
himself in a box he can't seem to break out of. His dreams are about being
detected and spending hard time in a federal prison in an orange jumpsuit
breaking big rocks into small rocks and small rocks into sand. The real shame
of all this is that barring a business life which generates illegal income the
dream is not even remotely related to the reality.
In fact, in the vast majority of cases IRS and our system of
tax administration is more anxious to have the non-filer join the system then
to spend their lives in a restless tax purgatory. Most of the fears that a
non-filer harbors are baseless. Of primary concern may be criminal prosecution
which is reserved for the most part to
illegal behavior or for those cases IRS had to use its less than abundant
resources to detect. Coming forth voluntarily is the best advice to avoid this
part of the nightmare.
Secondly, is the actual cost of coming forward. It is true
that the IRS code provides for interest and penalties, but no one goes to jail,
loses reputation and is held to community scorn for simply owing the IRS money.
Do a Google search of celebrities that have found themselves owing tax bundles.
What should come as relief to these non-filers is that the code provides
methods for paying back tax liabilities. These methods allow ordinary life to
continue as usual while still satisfying IRS tax law compliance. Foremost among
these is the installment agreement which simply gives time, in some cases up to
10 years to pay off tax liabilities. The taxpayer must fully disclose his
available resources to IRS and a payment plan can most often be worked out.
Where payments are not possible, the code also allows an Offer in Compromise to
be made. This procedure
allows taxpayers to offer to pay an amount in exchange for being released from
any unpaid balance which can include tax, penalty and
interest. In dire cases, if certain other conditions are
met, bankruptcy may also discharge income taxes and allow a taxpayer a fresh
start.
The point of all this is that tax filing season need not be
torture for the non-filer. Many of their worst nightmares will not materialize.
The time to act is before IRS makes contact.
Voluntary compliance and full disclosure with cooperation
with IRS will put most non-filers back on track and perhaps even getting refunds,
just like the adverts say or at least getting a decent night’s sleep.
Theodore M. David, Esq. is the chairman of the Bergen County
Bar Association’s tax committee. He is a former IRS agent and IRS lawyer who
practices exclusively in the IRS tax dispute area in Hackensack
New Jersey. He is the author of the ALI-ABA
tax text “Dealing With The IRS: Law, Forms and Practice”.
