The feds get a copy of our tax forms, and financial institutions share information. This leads many to wonder why we need to file tax returns in the first place. Critics argue that the current tax return system is not necessary, but the result of commercial tax preparation industry sponsored lobbies pushing Congress to maintain the status quo. The fact that both President Ronald Reagan and President Barack Obama’s administrations pushed for a return-free or simple return system for the majority of taxpayers supports this argument.
And yet, the IRS continues to expect taxpayers to fill out and file arduous forms year after year.
What if I stop filing tax returns?
Since the IRS has this information, what would happen if taxpayers stopped filing their tax returns? If this is an active attempt to evade tax obligations, the government could claim tax fraud. Tax fraud is a serious matter. If these allegations are supported, the government can move forward with criminal charges. This means the taxpayer would face more than just a bill for missed taxes and interest payments. The taxpayer could face jail time. To build a case the government will look for various pieces of evidence like keeping double books, destruction of records or making false invoices.
If an honest mistake, the government is unlikely to pursue criminal charges. The key difference between these two paths is willfulness — was the failure to file intentional or an accident? The answer to this question can result in two drastically different sets of penalties.
What should I do if the feds claim I did not file tax returns?
It is important to explore your options. For some this could include negotiating a repayment plan, for others the need to build a defense to false allegations of wrongdoing. The attorneys at Goldburd McCone are familiar with these matters and can provide guidance to better ensure you choose the option that is best for your specific situation.