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Is it Legal Not to File Taxes?

April 15th, the official deadline to file taxes, has come and gone, but the United States Internal Revenue Service (IRS) has extended this deadline due to the global pandemic resulting from COVID-19, commonly referred to as coronavirus. Whether you have not filed your taxes because you are missing the information you need to complete a return or you do not have the money to pay and are afraid to file and owe, it is important to understand that not filing taxes can result in serious consequences. While it is true that some people get away with not filing their taxes for years, understand that sooner or later Uncle Sam catches up with tax evaders. 

Possible Penalties

Some people do not pay taxes to politically protest Uncle Sam. Others are simply tax dodgers, and do not think the government should have any of their hard-earned money. In fact, there are even best-selling books on the subject of avoiding paying taxes. What these books do not tell you, however, is that purposely avoiding paying taxes can result in large criminal penalties including imprisonment and fines, in addition to civil penalties. 

Penalties for failure to file taxes can be as much as five years imprisonment and fines of up to $250,000. One Michigan public accountant was incarcerated for five months, on house arrest for another five months, and had to pay $140,000 in back taxes and another $50,000 in penalties and interest. These penalties were a result of him failing to file his taxes for just four years. There is a time frame, however, in which the government must file criminal charges against someone for tax evasion. The IRS must pursue tax evasion or related charges within six years from the date that the unfiled return was due. Of note, those who did not file and then later voluntarily filed their returns are rarely charged or penalized. 

Simply put, despite what anyone else may tell you, filing taxes is not optional. If you make over a certain amount of money during any given year, you must pay taxes on that earned income. Indeed, Section 1 of the IRS Code imposes a tax liability on individuals, trusts, and estates. 

Not Filing Does Not Equate Not Paying

The confusion between these two can lead to very serious mistakes because the IRS does in fact penalize for filing and for not paying taxes. People who calculate their taxes and realize they do not have the money to pay sometimes believe there is no need to pay if they do not file. This could not be further from the truth. This is because the non-filer will end up paying a 5% penalty per month (4.5% for not filing and 0.5% for not paying). The final penalty for failing to pay and file could add up to as much as 47.5% of the tax owed to the IRS. Interest is compounded daily and charged on unpaid tax.

In short, it is illegal to not file your taxes.

If you have other legal questions or have been hurt in an accident in Nevada, contact the Las Vegas personal injury attorneys at Matt Pfau Law Group today.

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