My friend is convinced that if you never file for taxes...?
My friend is convinced that if you have never filed for taxes, then you never have to. He says that his dad's tax preparer said that as long as you never file you are ok, but once you do file, you have to file every year. So now he is dead set against filing next year (even though he no longer works under the table, so he will be on the books). He really thinks that as long as you never file then you never have to pay taxes.
I told him this is BS and that his tax preparer has got to be wrong, and he better file or he is gonna be in a lot of trouble down the road and have a bunch of back takes to pay. I do not know much about this, I think you should just pay your taxes and go on, but this sounds like asking for trouble to me.
So who is right? And could you give me some links to show him (or me)?
We are in Ohio if that make a difference. (I doubt it)
?2009-05-27T06:46:28Z
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Your friend is wrong. Internal Revenue Code Section 6012 states:
"Every individual having for the taxable year gross income which equals or exceeds the exemption amount," . . .
then goes into some legal verbage that can basically be summed up by saying "unless you make less than ___ you must file a return."
Even income earned "under the table" is taxable, but of course it's harder for the IRS to prove it. There are a few isolated cases of people getting away with it for long periods of time, but those are few and far between. It usually catches up with them eventually.
Your friend is an idiot, and if the tax preparer really said that, he or she is an idiot also.
If he works on the books, his wages will be reported to the IRS. If he has too much withheld, then if he doesn't file he'll forfeit his refund. If he doesn't have enough withheld, the IRS will bill him for what he owes plus penalties and interest.
And from the other side, plenty of people get caught for "under the table" income also, so he's hardly home free for those years. One common way is that the company that was paying him gets audited, and they deducted the expense for paying him - then he's busted. Another common way is that somebody gets tired of hearing him shoot off his mouth about not paying taxes and reports him. In either case, he can end up with a huge bill for back taxes, penalties and interest.
And there are many situations where someone legitimately files one year but not the next because they don't have enough income in the later year to have to file.
Once he files the returns voluntarily with the IRS he can no longer be charged CRIMINALLY with failure to file. So He needs to file ASAP. He does not need an att'y. If there is tax due on any given year that return must be filed no matter what the year is. Refunds however will only be given for the past 3 years, so if returns are older than 3 yrs and have refunds due they need not be filed ,BUT still a good idea to file them to avoid IRS com,ing along later and demanding they be filed. If the tax due with penalties and interest is more than he can pay he may be a good candidite for an Offer in Compromise, whereby he offers an amt less than total tax due, to settle the entire debt. My suggestion is when ready to file take the returns to a local IRS office and ask to meet with a Revenue Officer. he can explain collection procedures and Offer in Compromise. When ever you talk to IRS get full name, title & PH # and write down gist of conversation and keep with tax records. If anyone in IRS is rude, not helpful, unreasonable demand to speak to supervisor. good luck.
If you make the minimum income needed to file - then you have to file. The question then is whether you will get caught.
Low unreported income - probably not. High unreported income there's a greater risk, especially if you have an employer who reports your income (W-2) or a bank account (1099) - the more paper out there with your name and SSN on it, the more likely you are to get caught.
Your friend should also realize that by not paying into Social Security (assuming he's paid in unreported cash), he will not be able to collect when he retires. If he's determined to keep below the radar - he won't have much in the way of savings or investments either.
I'd also wonder if his "tax preparer" is a CPA - the State licensing bureau might want to talk to him if he's giving out that kind of advice.
The U.S. Congress only gives the IRS enough money to audit about 1% of the taxpayers each year, so the odds of being audited due to random selection are rather small. And, only about 1 in 200 low income tax payers are subjected to audits because the IRS knows it will collect more revenue by auditing higher income taxpayers.
But ... the IRS generally follows up on information submitted on a W-2 form, a Form 1099 and a variety of other information returns. Most of these follow up inquiries are by mail, but if there is no reply, they will generally persist.
Those who work off the books as you put it are far less likely to be caught. Those who work for employers who follow the rules are far more likely to be caught if they don't file a return. Most people have found they can make a lot more money after taxes by working for companies that follow the rules than by trying to stay under the radar.
As for convincing your friend to change his or her mind, a lot of tax resisters are immune to any kind of logic. So don't be dismayed if your efforts fall on deaf ears.