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The United States subjects taxpayers to extremely rigid reporting requirements. One of the most basic and important of these reporting requirements is filing an annual income tax return. If you fail to meet these requirements, you risk exposing yourself to extremely costly penalties, and could even be criminally charged. However, while it is critically important that you take steps to correct delinquencies and deficiencies, you also should not rush into the process without the guidance of an experienced non-filed tax return lawyer and CPA who can help to minimize your liabilities, avoid disputes with the IRS, and reduce any additional penalties which you may owe.
At The Tax Law Offices of David W. Klasing, we offer our clients more than 20 years of dedicated legal and financial experience. To arrange for a reduced-rate initial consultation with an Irvine non-filed tax return attorney, call (800) 681-1295 today.
Non-Filed Tax Return vs. Failure to Pay: What’s the Difference?
At first glance, these two phrases seem almost interchangeable. However, this is a common misunderstanding, as the failure to file and the failure to pay are actually separate matters. This distinction is important primarily because it means that each failure can be penalized individually. The IRS emphasizes the fact that the failure-to-file penalty is usually the harsher of the two, and therefore places a more immediate priority on filing prior to arranging a payment plan.
Generally speaking, a failure-to-file penalty applies when you miss the filing deadline, whereas a failure-to-pay penalty applies when you miss the payment deadline. This may sound straightforward, but the regulations can become far more complex in cases where extended deadlines are applicable.
For example, the failure-to-file penalty will not be applicable if you request a filing extension prior to the original due date for your return. However, if you request an extension and fail to pay a minimum of 90% of your liability by the original due date, you can still be assessed a failure-to-pay penalty. In order to avoid a failure-to-pay penalty, you must pay at least 90% of your liability by the original due date, and pay any outstanding balance which remains by the extended due date.
Regarding deadlines, it is also very important to address the statute of limitations. While the statute normally places a firm time limit on the window for legal proceedings, in this context, the countdown begins only once a return is actually filed. The effect is that non-filed returns are essentially not subject to a statute of limitations — which means you cannot “wait it out.”
Financial Penalties for Late Filing or Late Payment
Typically, the late filing penalty is 5% of your unpaid taxes for each full or partial month that a return was delinquent, with a ceiling of 25%. However, if you are delinquent by more than 60 days, after either the original date or the extended date, the minimum penalty will be either 100% of the unpaid tax, or a flat fee of $135 — whichever amount is smaller.
If you do not pay by the due date, you will be fined with half of 1% of your unpaid taxes for each full or partial month after the payment deadline. Once again, the maximum penalty is 25% of your total unpaid taxes.
If both a failure-to-pay and failure-to-file penalty apply during the same month, the delinquent payment penalty actually reduces the delinquent filing penalty, which would normally be 5%. Furthermore, if you can successfully demonstrate to the IRS that you were late on a filing or payment due to a reasonable cause, as opposed to deliberate and willful neglect, it is possible that you may not be assessed any failure-to-file or -pay fines. This possibility is ultimately contingent on the determination made by the IRS, which means that having an experienced tax attorney and CPA guiding and representing you can increase your chances of avoiding penalties.
Is Failure to File a Tax Return a Crime?
It is extremely important to point out that if your non-compliance is determined to be a case of willful neglect, you could be facing serious criminal tax charges. Pursuant to 26 U.S. Code § 7203, “Any person required… to pay any estimated tax or tax, or required… to make a return, keep any records, or supply any information, who willfully fails to pay such estimated tax or tax, make such return, keep such records, or supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $25,000 ($100,000 in the case of a corporation), or imprisoned not more than 1 year, or both, together with the costs of prosecution.”
In other words, a willful failure could cost you $25,000, a year in prison, and a lasting criminal record.
Don’t wait until it’s already too late to rectify your situation and come back into compliance. To set up an initial consultation at a special reduced rate, call non-filed tax return lawyer David W. Klasing right away at (800) 681-1295, or contact our law offices online.
