As you already know, not filing taxes when you are required to, is a Federal Misdemeanor. Paying taxes is not optional in the US. IRS doesn?t forget unfiled tax returns. Taxes don?t just go away.
IRS may send you a CP2000 this year. This may happen if the IRS sees that the information that you provided doesn?t match information that they received from third parties. Most of the matching is done electronically, which is faster and more efficient. So, what you need to do when you receive CP2000?
You may either respond to this notice or ignore it. Ignoring it will cause the IRS to send you Notice CP3219A , Statutory Notice of Deficiency. If you disagree with CP2000, you may want to respond to it, showing the IRS that they made a mistake.
You need to have enough proof to show the IRS that your tax return was filed correctly and tax liability was correct. IRS will work with you to help resolve tax problems.
What to do if you never actually filed your tax return? Some people think that if they can?t pay the tax due, they should not file the return either. Then, when they even have the money to pay taxes, they still don?t file, because they think it will only make it worse. So, unfiled tax returns pile up, fear grows, sleepless nights start requiring medication, etc. You are not doing yourself any favor by not filing your tax returns.
Now, let?s talk about what penalties IRS imposes if you don?t file tax returns and underpay your taxes.
IRS has payment options to help you ?stretch out? your tax obligations. The key here is the willfulness. If you are wilfully not filing your tax return and as such, not paying the taxes, it is considered Federal Misdemeanor and penalized severely. If you are filing your taxes and making payments the penalties are significantly lower and in some cases are eliminated.
IRS has options for penalties relief if you have a reasonable cause why you didn?t pay taxes or file tax returns. If this happened the first time- the IRS might forgive the penalties. Also, if the IRS gave you erroneous advice- the penalties can be abated as well. You can go to https://www.irs.gov/privacy-disclosure/tax-code-regulations-and-official-guidance to see if qualify for penalties abatement relief.