Last week, on Ask the Tax Wizard, we had a poll asking the question: Which action would bring the worst punishment from the IRS? The choices were: a) Not filing your tax return, b) Defaulting on a current agreement, c) Owing the IRS money, and d) Not withholding enough taxes, or making estimated tax payments.
Once the poll ended, most of you thought the answer was “not filing your tax returns”, and that answer is Correct! Although none of the above mentioned are considered okay, unfiled taxes will get you in some serious trouble. The funny thing about the IRS is that it is not a crime to owe the IRS money; this is just a civil offense. However, not filing your tax return is actually a criminal offense, and is punishable with up to one year in prison for each unfiled year. So, you could owe the IRS millions of dollars and only have to worry about levies, liens, and/or property seizure, but you would still maintain your freedom.
A good example of this is Wesley Snipes. Despite the fact that he owes the IRS millions, he was sentenced to 3 years in prison for “willfully” avoiding filing a tax return. As we have covered before, filing your return can be complex (So, you need to file your tax returns, but complicated will filing be?) so seek help in preparing your return! If you find yourself with unfiled tax returns, don’t wait around, there is help just waiting for you.