What happens if I don't pay my taxes?

http://www.slate.com/id/2216218/

by kqr2 • 17 years ago

47 50 17 years ago

slate.com

vaksel2• 17 years ago

I bet the author just made the "make sure to audit him" list.

mdasen2• 17 years ago

It depends.

Most people have already paid their taxes and just have to file some paperwork confirming it. Many people have overpaid and if they don't fill out that paperwork, the government gets extra money. The IRS isn't going to care much then.

If you owe a small amount of money (probably the most likely case) they are going to care, but it's just not worth their while to deal too much with it. By small amount of money, I mean like $100. At that point, they'll want you to pay it, but it might cost them more to get you to pay it than the $100. Having a staffer spend 3 hours dealing with you would probably wipe out that $100. So, they'll take measures to make you pay, but they aren't going to waste too much effort.

If you're underpaying your taxes by a good deal, they'll make your life hell if you decide to brush them off.

The IRS operates similarly to how you'd expect - some things are worth their time, others aren't. Yeah, there are always humorous stories about someone getting a bill for less than a dollar, but overall the IRS wants to spend its time chasing the money. That means going after the egregious violators who are rich because those are easy to spot and have the most benefit to them. Going after someone earning $50k who forgot to report $30 worth of interest income on one of their bank accounts just isn't worth it.

randallsquared• 17 years ago

Even if it's not technically worth it, they may do some amount of going after tiny infractions in order to "send a message." Their focus on efficiency or patriotism seems to vary with administrations, and it might be too early to determine how it's going to shake out under the current administration.

mdasen2• 17 years ago

Oh, definitely. Like, they aren't going to send a message over $3, but they will probably expend some effort when it gets closer to being profitable.

jamiequint• 17 years ago

I just got audited for my 05-06 taxes over a discrepancy of less than $200 (for which they were proven wrong anyway). I was 19 at the time and made a total of about $4k that year. Its frustrating that the government will spend my tax money wasting their time (and mine) this way.

kqr2• 17 years ago

I noticed a potential "loophole" in interest income this year. If it's less than $10 from a single institution, you don't need to report it. In fact, they will not even issue a 1099. I called my bank and they confirmed that I don't need to do anything.

So, in theory, you could have 100 bank accounts each with $9.99 interest and not pay any taxes.

But then again, maybe having 100 bank accounts would automatically trigger an audit.

tokenadult• 17 years ago

then again, maybe having 100 bank accounts would automatically trigger an audit

Don't you have to mention your Social Security number every time you open a bank account? Yes, I think having 100 different bank accounts would get attention from some government agency, perhaps the Department of Treasury office that tracks money-laundering.

joubert• 17 years ago

Can you share the URL to the relevant part in the tax code that provides for this?

njharman• 17 years ago

$999 whole dollars! Every year!!! And not giving %25-35% to the Feds. Zomg that is so totally worth it.

jacoblyles• 17 years ago

The fear that they instill in others from the expectation that they will be audited if they cheat or mess up is worth more to them than the actual taxes collected.

tallanvor2• 17 years ago

I know someone who got hit with fines for owing less than $50, so it's probably better not to take the chance (she ended up paying over $100 in penalties in addition to the money she owed).

old-gregg• 17 years ago

I wonder how state residency is enforced. NY has very high state income tax and I'm thinking of getting an apartment there while keeping my house in another state - how do I make sure that I won't be counted as NY resident?

nuclear_eclipse• 17 years ago

Don't get a NY state ID. You have to file paperwork to become an official citizen of New York (eg, your primary residence). My wife and I had to do this when I moved from Ohio to NY for university. Naturally, I'm not a lawyer/accountant/etc; contact a CPA for full information.

anamax3• 17 years ago

> Don't get a NY state ID. You have to file paperwork to become an official citizen of New York (eg, your primary residence).

I'd be surprised if NY was that lenient.

CA isn't. I know of cases where they went after folks who had no CA property and hadn't been in the state for months before receiving income that CA wanted to tax.

CA says that you're a resident after a small number of days for the purposes of car registration. I'd be surprised if they were more lenient when income was involved.

CA wants income taxes from folks who win money in golf tournaments or play professional sports a couple of times a year in CA.

Residency is tricky. There's an infamous case where >100% of an estate was owed in taxes because several states managed to claim that the deceased was a resident of their state for the purposes of taxation.

Kadin2• 17 years ago

Where you will run into trouble is with getting paid if you work for a company in New York. If you don't draw a paycheck from a company based in New York, or have anyone paying you so much that you file a 1040, there will probably be little way for them to catch on.

However if you get a driver's license or register your car there, then you may start getting snagged. If that happens you will be deep in see-a-CPA territory, since you'll need to prove that your primary residence really isn't in NY, and that you paid taxes on all of your income in another state, didn't earn any of it while working there, etc.

If you put down your New York address on any payroll forms though, it's pretty much all over. I have heard anecdotally they are extremely aggressive (and also don't have the rules against double-taxation) compared to other states.

darwinw• 17 years ago

then you're not a patriot

anamax3• 17 years ago

Why are folks downvoting someone for quoting Vice President Biden?

nazgulnarsil• 17 years ago

don't worry about it too much. report and pay taxes on things that have a paper trail, don't for things that don't. under reporting things for which there is a paper trail isn't worth the effort.

scott_s• 17 years ago

Do people really queue up at the post office still? I do all of my taxes online. Granted, my income is low enough that the federal TurboTax online is free, and the state I'm a resident in has its own online system.

ams6110• 17 years ago

I always just drop mine in the mailbox. I don't file electronically because of the fee. Hm, $10 (or whatever) to file electronically, or $0.42 to use the mail? Easy choice.

run4yourlives• 17 years ago

It costs you money to file online in the states? That sounds completely counter-intuitive to me.

vaksel2• 17 years ago

Proof that IRS received your information or worrying daily whether or not they got it

taxdodge3• 17 years ago

I didn't pay my taxes in 2000. I owed about $3000 federal and $3000 to California.

California will eventually catch up with you (it took 7 years for me) and take the money directly out of your checking account. They will send you letters telling you that they are going to take the money out of your bank before they do it.

The federal IRS will just keep sending you letters. It's worth paying up ASAP because the interest is substantial. I ended up paying about $800 in interest.

None of these things ended up on my credit report, which was a relief but I thought was a bit weird.

I've also heard that your passport won't be renewed if you owe the government money. However, I'm not convinced the IRS and the state department are well coordinated. I'm assuming it's more about preventing huge tax evaders from fleeing the country.

tptacek• 17 years ago

I don't believe the passport bit. I think it's probably apocrypha based on an alleged IRS trigger when you renew your US Passport overseas --- expat taxes are a thornier issue than stateside taxes.

staunch• 17 years ago

I seriously doubt the passport thing is true in the common case. You do need tax returns to file as the sponsor for a VISA application though.

yters• 17 years ago

Is there a threshold that your interest account has to pass before the IRS will take more drastic action?

taxdodge3• 17 years ago

I've forgotten the details. At the time I was panicked so I did a lot of research on the subject. I vaguely remember that there is an upper limit to the amount of interest they can charge.

sokoloff• 17 years ago

I fell behind in filing by a couple of years back when I was doing a lot of daytrading, and because of the way the IRS gets its data feed of stock sales, but not associated cost basis, they were sending me bills for literally 7 figures of overdue taxes. (I'd done about $6mm of stock sales that year, naturally with a cost basis of somewhere pretty close to that $6mm.)

They see $6mm in sales, treat it all as capital gains, compute the tax I owed on it (and obviously hadn't remitted), stacked up huge penalties and failure to timely file fees, etc.

When I finally got around to filing the correct information (you have 3 years from the original due date of the return to file to claim a refund), they took the updated schedule D information, and cleared the account.

In the 18+ months that they were sending me notices for over a million bucks, they never took any further action. So, I don't think it's a dollar threshold, but rather a time threshold at which point they start attaching wages, subjecting you to backup withholding, etc.

Also, the stress totally isn't worth it.

jpcx013• 17 years ago

Is the statute of limitations (6 years) that's mentioned in the article BS? I sort of suspect it is. 6 years seems way too short.

taxdodge3• 17 years ago

Federal used to be 6 years, now it's 10. States have different statutes of limitations. California doesn't have one.

mattmcknight• 17 years ago

I have had requests from the IRS and state taxing authorities to garnish wages for employees that didn't pay their taxes in both of the past two years and were hit with liens. They send me a bill, due immediately, and then leave it to me to subtract the funds from payroll to pay myself back. In one case it was more than the total post tax payroll amount for the employee for the month.

petercooper• 17 years ago

I'm surprised to find that the tax situation in the US is so lax. Here in the UK it's a massive and very serious deal if you don't pay your income taxes (to the point of people wrongly accused of not paying taxes being declared bankrupt within months and losing their homes, etc.)

Short lesson is, never, never, never dick with the tax man if you're a British tax payer.

jpwagner• 17 years ago

The good ole USofA will be there soon enough...

jpcx013• 17 years ago

How stuff works has a good article that lists some of the late fees and penalties http://money.howstuffworks.com/personal-finance/personal-inc...

gcheong2• 17 years ago

"Instead, they'll just file a tax return for you and charge you a fee for the trouble."

Why can't I just check an 'opt-in' box somewhere and have this as the default? It just seems inane that every year I have to go through this ritual of copying numbers from one form to another form when the gov't already gets its own copies. I mean, why can't this be automated where you get an intial version from the gov't and if you want to file an amendment to correct or include other items then you can but if you just accept the default you can do that too? Too efficient maybe?

Devilboy• 17 years ago

They do that in New Zealand. Your employer(s) send all your income details to the tax department and at tax time the tax office just sends you a bill. Pretty convenient by the sound of it.

shiro• 17 years ago

Japan does that, even further. Your employer not only files for you but also calculates all adjustments and pay you (if you paid too much tax) or deduct from your wage (if you owe some). If you work for one company and have no extra income, which had been typical for majority of Japanese until recently, you'll never have to deal with the department of taxation.

But I think it has downside. Those who do not touch their own tax calculation don't tend to think about taxes; most of my acquaintances when I was in Japan had very vague idea of how much they paid for tax. After moving to US I noticed that people are much more aware of tax they're paying, hence how the government spends them.

I now even think Japan should make everyone file, like US.

Confusion• 17 years ago

The Netherlands isn't much different. You can download a program (even a Linux version :)), download the data they have on you, load it, add info and submit the form. All I did was check that the income was correct and I filled in the amount of interest I paid for my mortgage. Result: they owe me 15 EUR.

tallanvor2• 17 years ago

Norway is very similar. They send you a return that is already filled out, and if you agree with the numbers, you don't have to do anything. If you do need to make changes (such as, say, the 10% credit for foreigners during their first two years in the country) you go online and add the information yourself.

wmf• 17 years ago

That sounds like it would nearly eliminate the tax preparation industry.

jpcx013• 17 years ago

Industries that don't produce anything are probably worth eliminating

gcheong2• 17 years ago

I'd call it creative destruction but perhaps the alternative then, and probably more likely, is that I will have the option of receiving an electronic version of my w-2's (already available to some extent) and different 1099 this and Schedule A-Z that forms, etc. which can be imported directly into my tax prep program rather than filling in all the 'enter the number from line X of form Y ' lines one by one.

spc476• 17 years ago

What about the deductions for mortgate interest rates? Or dependents? Or deductions for business expenses? For the government to "include" those would mean the government is more intrusive, I would think.

knightinblue• 17 years ago

The govt wouldn't have to to include them. Those options will just be listed out on your form. You simply log in and make the neccessary changes for yourself.

jimfl• 17 years ago

I am made to understand that the IRS will accept tea bags in lieu of the balance owed.

asnyder• 17 years ago

Regardless of whether you pay your taxes or not, make sure you file them. Failure to file has much larger penalties associated with it than paying late.

known• 17 years ago

    * I pay TAXES. 
    * With them I buy CIVILIZATION.

What happens if I don't pay my taxes?

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