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New Haven, CT: The IRS Crackdown on Non-Filers: What You Need to Know

By
Education & Training with Tax Rep LLC

I represent taxpayers with tax issues in New Haven, Connecticut as well as all over the country before the IRS, Department of Justice Tax Division and State Departments of Revenue.  The IRS knows there are more than 10 million non-filers and has known who they are for several years now.  Last week the IRS announced the long awaited move against the top 125,000 high-income non-filers is starting

For those who haven't filed their taxes there are a few initial considerations:

  • How many years must they file?
  • Should they just file or should they request Voluntary Disclosure?

Compliance with tax regulations goes beyond avoiding penalties; it involves maintaining your filing and payment compliance and working out an arrangement on any back-taxes owed. Submitting tax returns on time is vital—even if you can't immediately pay what you owe—as it helps prevent penalties for failure to file or pay on time. Additionally timely filing allows taxpayers to claim any refunds within the three years permitted before the funds are donated to the government.

How Many returns Must a Person File?

For purposes being considered “in tax compliance” with the IRS you must have at least the last six years of tax returns on file.  The state’s do not necessarily follow this rule, and many states (like Connecticut) have no rule – they will want every return missing.  Thankfully, most states have their own voluntary disclosure rules  designed to incentivize taxpayers who have not complied to come forward and fix the issue. Each state’s program, though, is different.  For instance, Connecticut wants the last three past-due tax returns filed, while New Jersey wants four years, and California wants ten years.  Connecticut will waive penalties, but the amount due must be paid in one payment – there are no payment plans or compromises with Connecticut in voluntary disclosure.

Taxpayers and their tax professional must review their state’s program to determine what will be required to get into compliance.

IRS Voluntary Disclosure

In contrast to state programs, the IRS voluntary disclosure program primarily caters to taxpayers facing criminal exposure.  The IRS specifically does not want taxpayers filing for voluntary disclosure if they do not believe they have criminal tax issues.  For taxpayer’s doing an IRS Voluntary Disclosure, they must agree to the following:

  • They will fix the years at issue, limited to the last six years,
  • They agree to fully cooperate with the investigation, including being interviewed and working with the auditor assigned to their case, and
  • They agree to pay a 75% civil fraud penalty on the largest balance year, and a 20% accuracy penalty on the other years.

Given the IRS's pursuit of non-compliant individuals many taxpayers will be seeking assistance from tax professionals in the coming year. The approach taken by these professionals in handling clients will greatly influence how smoothly individuals can re-enter the tax system. Whether it involves helping with filing returns, negotiating with the IRS, or navigating state voluntary disclosure initiatives, tax professionals play a role in resolving tax compliance matters.

If you or someone you know needs help resolving an IRS tax issue, please contact me at (203) 285-8545 or by email at egreen@gs-lawfirm.com.

Eric L. Green, Esq.

Green & Sklarz LLC

1 Audubon Street, 3rd Floor

New Haven, CT 06511

Ph. (203) 285-8545

egreen@gs-lawfirm.com

https://gs-lawfirm.com

 

Eric Green is one of the managing partners of Green & Sklarz LLC where he focuses his practice on civil and criminal taxpayer representation.  Eric is a nationally renowned tax expert and author/commentator of IRS civil and criminal tax matters.  Having lectured to more than 70,000 practitioners on civil and criminal tax topics, he is one of the nation’s best known lecturers in continuing professional tax education.  Eric is the author of the Insider’s Guides to IRS Representation, including The Insider's Guide to IRS Collection.

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