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What the IRS does when someone doesn’t file or underpays

On Behalf of | May 7, 2023 | Tax Law |

Most people resent the obligation to pay federal income tax, but doing so is a legal and social necessity. The desire to minimize taxes and even to avoid them is perfectly normal. Quite a few people wait until the very last moment to file their tax returns or pay what they owe the Internal Revenue Service (IRS) based on their federal income tax return. Many people also engage in tax minimization or avoidance strategies to reduce how much of their income they pay to the government each year.

Sometimes, those strategies go a bit too far and leave someone with an unpaid tax obligation. Occasionally, those procrastinating about their tax returns might actually fail to file altogether. What happens when someone doesn’t file an annual income tax return or underpays their federal income taxes?

The IRS will impose penalties

Violations of the tax code typically lead to penalties. Mistakes ranging from the underpayment of estimated taxes to a late filing can trigger financial penalties. The taxpayer will need to cover not only whatever they owe in taxes but the full cost of the penalties and any interest that has accrued on the balance that they owe. In cases where people do not pay their tax debts or where there seem to be signs of intentional misconduct, the IRS may pursue an audit or even criminal prosecution.

How the IRS takes action

During an audit, taxpayers typically have to provide years of financial records to the IRS for review. Sometimes, they may need to attend a sit-down meeting with the IRS. If there are tax underpayments or other issues discovered during the audit, then the IRS may assess penalties and possibly pursue criminal charges.

Tax fraud and tax evasion are among the criminal accusations that can result from someone not paying their taxes in full and on time. Those who understand the risks of mistakes related to their income tax obligations may do a better job responding to IRS communications or resolving a late filing or making payment arrangements for a balance owed.

Seeking legal guidance to learn more about possible tax law issues can help someone to potentially avoid the worst consequences, even if they made a significant income tax mistake.


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