The IRS has heard all sorts of excuses for not filing a tax return. "Surprisingly, the one you don't hear is 'the dog went on my tax return'," said Bill Smith, the managing director of the national tax office at CBIZ MHM, an accounting provider. But that doesn't mean taxpayers don't offer up all sorts of other excuses.
Even what might seem like legitimate reasons for not filing taxes often don't pass muster with the IRS. There are only a handful of valid excuses the government accepts. So if you try to use any of these 10 defenses for filing late or not filing at all, you won't be off the hook -- and could end up in serious hot water.
1. I don't have to file because it's voluntary
Some people contend that they don't have to file a federal tax return because the instruction book for the form taxpayers must use to file a return -- Form 1040 -- states that the tax system is voluntary. They also quote a Supreme Court decision in the case of Flora v. United States: "Our system of taxation is based upon voluntary assessment and payment, not upon distraint."
"Voluntary" refers to "our system of allowing taxpayers initially to determine the correct amount of tax and complete the appropriate returns," according to the IRS. Filing a tax return is not voluntary. If you earn a certain amount of income in a year and don't file, you can be subject to civil or criminal penalties -- including fines and jail.
2. I won't have to pay what I owe if I don't file
Say a taxpayer can't afford to pay his taxes and decides he doesn't want to file a return. He might even assume that the IRS won't know that he owes if he doesn't file, said Stephan M. Brown, a tax attorney and partner at NewPoint Law. "That's criminal and could land you in jail," he said.
The IRS gets the same tax forms that your employer and financial institutions send you, showing your wages and any investment income. So if you don't file a return, you eventually will get a bill from the IRS for what you owe -- along with penalties and interest.
If you owe but can't pay, you can limit the damage by filing a return on time. The failure to file penalty is 5% of the tax owed each month your return is late, up to a maximum of 25%. If you file but do not pay, you will be charged a 0.5% penalty on what you owe each month until you pay in full. If you request an installment agreement, that rate decreases to 0.25% for any month in which an installment agreement is in effect.
The IRS allows taxpayers to make monthly payments through an installment plan if they cannot pay their balance in full when it is due. If you truly cannot afford to pay taxes, you might be able to settle your bill for less than you owe through what is known as an "offer in compromise." Learn more about what to do if you can't pay your tax bill
3. I didn't receive my forms
If the forms you need to file your tax return -- such as a W-2 and 1099 -- haven't arrived by March, you need to reach out to the companies that are supposed to send them to you to find out why you haven't received them yet, Smith said. "You have to be proactive about getting the form" because it's not a valid excuse to avoid filing if you don't have it, he said.
If you don't receive the necessary forms on time, file without them by estimating your income based on your pay stubs, account statements, and previous year's return. Smith said that you should let the IRS know that you're using estimates by filing a Form 8275. This disclosure statement, along with a note explaining your situation attached to your return, should help you avoid penalties if you underestimate the amount you owe, Smith said.
4. The IRS will file a return for me
Some people argue that a section of the tax code requires the IRS to file returns for taxpayers who don't file returns on their own. But that's a flawed interpretation, according to the IRS.
The IRS will determine your tax liability if you don't file -- and let you know if you owe money. But that doesn't mean you're relieved of your requirement to file a return. If you don't, you will face civil or criminal penalties, according to the IRS.
5. I thought I filed electronically
The IRS claims that using tax software and filing your return electronically will help you avoid most tax return errors. However, if you hit the submit button and your return isn't actually sent, that doesn't mean you're off the hook for late-filing penalties. It's up to you to ensure your return was filed, Brown said.
If this does happen, it might take up to a year before the IRS sends you a letter indicating that its records show you had income but didn't file a return, he said. If you owed taxes, late penalties and interest will have accrued. But Brown said that if you mail in your return with a letter explaining to the IRS that you thought you had filed, you might be granted a one-time forgiveness and be able to avoid penalties.
6. I got divorced and thought my ex was filing for us
Divorce can create all sorts of confusion over who pays for what. However, it's not an excuse for not filing your return, Brown said.
Even if you were married for part of the year, you should file a return based on your marital status as of Dec. 31, Brown said. So if your divorce was finalized before then, you should file your own return as a single taxpayer.
If there are disputes over who claims the kids, don't use that as an excuse for filing late, either, Smith said. Go ahead and file to avoid a "failure to file" penalty, then come to an agreement with your ex and file an amended return if necessary.
7. I don't need to report my military retirement pay
Military service members don't have to include combat pay as taxable income. But military retirement pay doesn't get the same favorable tax treatment, according to the IRS. So don't try to claim that these payments aren't taxable income and, therefore, you don't need to file a return.
The tax code defines gross income as "all income from whatever source derived, including ... pensions," according to the IRS. In one case, the tax court imposed a $25,000 penalty on someone who failed to file a return, claiming that military retirement pay wasn't income.
8. I'm confused about how to file a return for my business
Some people's tax situation can be more complicated than others -- especially taxpayers who are independent contractors or small business owners. Being confused about how to handle your taxes in these situations isn't an excuse for not filing, Brown said.
If you've started a new business during the year and don't file a return for your business income, the IRS will send you a notice asking for a return, Brown said. If you don't respond, you'll get a notice stating that the IRS will garnish your wages or levy your bank account. "It gets serious after some time," he said. "It usually takes a couple years to get to that, but the IRS will eventually take your money."
If you're a new business owner or independent contractor, consider hiring a tax professional to help you understand your obligations and prepare your return.
9. Someone already filed a return in my name
Tax identity theft has been a growing problem, with millions of returns being filed using stolen Social Security numbers to claim fraudulent refunds. If you get a letter from the IRS stating that a return has been filed in your name, or you receive a message that your electronic return can't be filed because one already has been submitted with your Social Security number, don't assume that you should wait for the issue to be resolved before filing your legitimate return.
You'll need to file a paper return by the filing deadline, Brown said, and include a Form 14039, Identity Theft Affidavit, along with it. Then, follow these steps if you're a victim of tax fraud.
10. I forgot to file my return -- really
If you prepared your return but truly did forget to file it, the IRS won't accept your forgetfulness as an excuse, according to tax software company TurboTax. If you forget to file and are owed a refund, you won't face a failure to file penalty. However, you could lose your refund if you don't file a return to claim it within three years of the return's due date, according to the IRS.
If you do owe, you might be subject to the failure to file penalty (5% to 25% of what you owe, plus interest) and the failure to pay penalty of 0.5% of what is owed each month until you pay in full.
You could get a pass from the IRS, though, if you forgot to file because you were struck by a serious illness or there was a death in your family at tax-filing time. Death and illness are among the few causes of filing late accepted by the IRS.
This article originally appeared at GoBankingRates.
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