Every year, millions of Americans are required to file income tax returns. However, not everyone does. The question often arises: Do people get away with not filing taxes? The answer is both yes and no. While some individuals manage to avoid filing for extended periods without immediate consequences, the risks are significant, and eventually, the system tends to catch up.
Why Some People Don’t File
People fail to file taxes for various reasons. Some genuinely don’t understand their obligations, especially if their income is low or they’re self-employed with irregular earnings. Others may fear owing money they can’t pay or feel overwhelmed by the complexity of the process. A smaller number deliberately avoid filing in an attempt to evade paying taxes altogether.
Can They Really Get Away With Not Filing Taxes?
In the short term, some non-filers do slip through the cracks. The IRS doesn’t audit every taxpayer, and it lacks the resources to pursue every case immediately. In fact, according to the IRS, tens of millions of people either file late or not at all each year, and only a portion of those are actively pursued at any given time. However, the idea that people truly “get away” with it is misleading.
The IRS Has Long Memory
The IRS uses several methods to identify non-filers. Employers, banks, and other financial institutions are required to submit income reports (like W-2s and 1099s) to the IRS. If these reports don’t match a filed return, that raises a red flag. Eventually, the IRS may send notices, assess taxes owed, and apply penalties and interest. In serious cases, it can place liens on property, garnish wages, or even initiate criminal proceedings.
While the IRS may not act immediately, it has up to three years from the date a return is due to audit it — and there is no statute of limitations on unfiled returns. That means even if someone hasn’t filed for 10 or 20 years, the IRS can still demand those returns and back taxes.
Penalties Add Up
Failing to file taxes is usually more expensive than filing and not paying. The failure-to-file penalty is 5% of the unpaid taxes for each month a return is late, up to 25%. Interest also accrues on unpaid taxes, making the final bill much higher than the original liability. In rare but extreme cases, willful tax evasion can result in criminal charges, fines, and prison time.
What Should Non-Filers Do?
If someone hasn’t filed taxes and is worried about consequences, the best course of action is to voluntarily come forward. The IRS is generally more lenient with individuals who take the initiative to correct their mistakes. There are also programs like the IRS’s “Fresh Start” initiative, which can help people settle tax debts and avoid harsh penalties.
Conclusion
While some people avoid filing taxes for years without immediate punishment, they are not truly “getting away with it.” The IRS has the tools and time to catch up. Avoiding taxes may provide short-term relief but often leads to long-term financial and legal trouble. Filing — even late — is almost always the better option. For expert taxation aid, reach out to Dimov Tax today.