My friend is convinced that if you never file for taxes...?

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.

If he works for someone, drawing a paycheck, and having taxes withheld for him, then his employer is reporting his earnings to the IRS, and they will evenutally knock on his door if they think he owes. But chances are, that he'd get a refund, in which case, they don't care if he files or not, since the IRS gets to keep the overpayment if you don't file for it within three years of the original due date of the return.

If he earn money by being paid cash, it's true that he's less likely to get caught, but it doesn't mean he doesn't have to file. All income is reportable. And if they catch up with him eventually, he'll be in doo-doo. Or if he ever wants to buy a house, he'll have no way to show proof of income, and no bank will touch him.

That weird argument about only having to file if you ever file is a crackpot tax protester theory that is incorrect. It relies on the presupposition that you enter into a contract with IRS by filing. It is hooey. The law requires you to file if you make over the minimum filing amount (Standard Deduction plus Exemption for non self-employed). Self-employed folks are required to file if they make over $400 due to social security.

IRS will get him someday but it might be a while.

It is what people are sure is true, but isn't really, that gets them.

If enough income is reported under your friend's SSN, the IRS will do substitute returns for your friend, then try to collect those taxes. The IRS doesn't need his permission.

But if it looks like he would owe minimal tax, or get a refund, if he filed, the IRS won't bother him.

This is what is coming...

He offered to pay over what the IRS said he did with 5 million in checks. His sorry *** still has to go to jail for 3 years. No clue how many years he would have went if he didnt pay the back taxes.

And this is the perfect case of failing to file taxes. They are easier if you file and cant pay.

http://news.bbc.co.uk/1/hi/world/americas/7366211....

Your friend is playing with fire, so to speak.

If he you make a certain amount of money, you're required to file.

If he had money coming back every year, it isn't too bad not to file, but if he tries to file and collect the money, they only give refunds going back two years.

If he owed money each year, then he's in deep trouble, and can end up owing a horrendous amount of money, as the interest rate penalties are very large.

But it's foolish to try to get around the IRS, they can catch up with him and really stick it to him.