Next to outright tax fraud or deliberate tax evasion, failure to file a federal tax return is considered by the Internal Revenue Service (IRS) to be the most egregious form of non-compliance. However, year after year taxpayers by the hundreds fail to file required returns. Do taxpayers have to file? Although there are several reasons why taxpayers do not file federal tax returns, essentially none of the reasons is acceptable to the IRS.
However, there are reasons occasionally acceptable to the IRS for not paying the taxes owed at the time taxes are due, if there is reasonable proof that such reasons are genuine.
Generally, the reasons fall into two categories:
financial and unusual circumstances.
If the IRS determines that the reason is justified, it can choose to grant extensions. Although these extensions do give additional time for taxpayers to pay taxes due, taxes still have to be paid.
Very seldom are tax remissions ever granted. If taxes are owed and the funds are not available to pay the tax, taxpayers generally will be required to pay interest on the amount owed.
Financial. Very seldom, if ever, will the IRS allow tax burdens to be relieved strictly because taxpayers do not have the money. Therefore, non-availability of funds is never an acceptable reason for failing to file a tax return.
The position usually taken by the IRS is that everyone who has sources of income can and must file tax returns, and they can get the funds needed to pay their taxes, even if they have to get an equity loan on their home or sell the home to do it.
Therefore, if taxpayers determine that they owe additional taxes but don't have the resources to cover the tax obligations, they can file
along with their tax returns , IRS Form 1127 entitled
Application for Extension of Time to Pay Tax, if it is filed before the April 15 deadline. If the IRS honors the extension, taxpayers may be granted an additional six months to pay.
Unusual circumstances. Although the IRS accepts very few unusual circumstances as reasons for not paying taxes, the two that are most readily accepted are record keeping problems and medical crises.
Accounting and bookkeeping ignorance is never an acceptable record keeping problem. However, lost and/or disorganized records due to household or business fire, theft, civil disobedience, declaration of marshal law, natural disasters, catastrophe trauma (death or disabling of sole financial household support or if sole financial support was a casualty of declared or undeclared military action or training), or medical institutionalization by doctors' recommendations before April 15 and extending through April 15, do qualify as acceptable record keeping problems.
Medical crises could include not only medical institutionalization, but also medical expenses and/or therapy that exceed taxpayers' ability to pay taxes due on April 15.
As with financial problems, if taxpayers cannot pay their taxes due to unusual circumstances, they still must file their tax return but they can also file the IRS Form 1127, requesting an extension.
Filing status When filing federal income tax returns, taxpayers must choose their filing status from the following options:
single, married filing jointly, married filing separately, head of household, or
qualifying widow(er). Single. If taxpayers are single as of December 31 of the tax year, they can choose to file single. If they are unmarried and have children, they may be able to choose either single or head of household.
Married filing jointly. If couples were married as of December 31 of the tax year they can choose to file married filing jointly. When this status is chosen, the incomes of both spouses are combined on a single return and tax is applied to the total.
There is a provision under married filing jointly which may allow a spouse to file an application for
Innocent Spouse Doctrine. This releases one spouse from tax liability if he or she can prove innocence in cases of married filing jointly tax fraud or evasion. For more information concerning this aspect of married filing jointly, consult the local office of the IRS or with a trusted CPA, tax advisor, or attorney.
Married filing separately. This option can be used by married couples that are separated or in instances in which the spouses have extremely contrasted levels of income and/or deductions for the year.
Head of household. Head of household status can be chosen if taxpayers are unmarried as of December 31 of the tax year and have at least one child or relative who can be claimed as a dependent. In certain special cases, head of household can be claimed if taxpayers are married. For information regarding these special situations, consult with the local representative of the IRS.
Qualifying widow(er). If a taxpayer's spouse dies during the current or previous
tax year and the surviving taxpayer did not remarry, he or she can claim qualifying widow(er) status if he or she had a child who has lived with him or her for all of the current
tax year and paid for more than 50 percent of the cost of maintaining a home for the child, if the child can be claimed as a dependent, and if the surviving taxpayer filed a married filing jointly return with the deceased spouse in the year that he or she died.
If the spouse died in the current
calendar year, the surviving taxpayer cannot file qualifying widow(er) status for the current or previous tax year. However, he or she may be able to file as head of household or as single.
Who must file? Basically - with only a few exceptions - if there are sources of income coming into taxpayers' households, taxpayers are receiving a refund, they are receiving earned income credit, if they owe any special taxes (prize or lottery winnings as an example), or if wages paid to taxpayers from charitable organizations exceed $108.00, they must file tax returns.
Those who
may not be required to file are singles whose gross annual income is less than the minimum taxable income allowed, married couples filing jointly with a gross annual income of less than the minimum, married filing separately when a separate income is less than the minimum, self-employed whose gross annual income was less than the minimum allowable, or qualifying widow(er) with dependent child whose gross annual income is less than the minimum allowable (consult with a qualified and trusted CPA, tax advisor, attorney, or local IRS representative for the most accurate information concerning filing requirements and for the allowable minimum taxable income).
Taxpayers' rights Appendix G at the end of Larry Burkett's book,
Debt-Free Living, discusses the Taxpayers' Bill of Rights by providing information about where to get help, what taxpayers can expect from IRS examiners, and how to appeal decisions that taxpayers feel are unjust.
Taxpayers are entitled to courteous and considerate treatment from IRS employees at all times.
Therefore, if they ever feel that any IRS representative is not treating them with fairness, courtesy, and consideration, taxpayers have the right to contact the employee's supervisor.
If the IRS audits taxpayers and they do not agree with the examiner's report, they may meet with the examiner's supervisor to discuss the case further.
If they still do not agree with the findings, they have the right to appeal. See IRS Publication 5, Appeal Rights and Preparation of Protests for Unagreed Cases, for details concerning this type of an appeal.
Depending on whether taxpayers have paid the disputed tax before seeking an appeal, they can take cases to the U.S. Tax Court, the U.S. Claims Court, or the U.S. District Court. These courts are entirely independent of the IRS.
As always, taxpayers can represent themselves or have someone qualified to practice before the court represent them.
Conclusion Although there may be many options open to taxpayers with regard to paying taxes due or paying past due taxes, there are very few, if any, options available for those who are required to file a federal income tax return but do not file.
The IRS has prided itself on becoming more flexible and friendly to taxpayers over the last few years. However, when it comes to neglecting to file income tax returns, there is little, if any, leniency.
For additional information regarding the Internal Revenue Service and the free services available to American taxpayers, contact them toll free at (800) 829-FORM (3676) or go online at
IRS.gov and request IRS Publication 910, Guide to Free Tax Services.
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