Normally when someone has not filed income tax returns for a few years, the IRS is willing to just get the returns filed and paid. It usually has no jail time involved. The IRS will charge interest and some penalties.
However, a taxpayer named Laubly was sentenced to eight years in jail for willful failure to file a tax return and for tax evasion. Perhaps it was the tax-evasion charge that the court found as adequate reason for the jail time.
If the returns are filed with everything reported correctly, the IRS does not want the taxpayer in jail. It’s harder to collect if the taxpayer is not working.
If you know someone who did not file returns and pay income taxes for a few years, you might suggest they look into getting those returns prepared and filed.
If they have not filed the past-due returns, perhaps it is partly because they just can’t pay what is owed. Installment-payment agreements with the IRS can be done if they can’t pay everything at once.
In the past year our firm helped two individuals get “caught up” in filing back years’ income tax returns. By filing the returns and paying the tax, interest and some penalties, the taxpayer was not even close to going to jail. The IRS just wanted them to be back in the system, filing and paying timely in the future after the back years were cleared up.
I remember one situation a few years ago, where an individual wanted to get married, but his intended wife would not agree until he filed the back years’ income tax returns. It was all worked out with the returns being filed and paid, and they did get married.
It is not fun or easy to face certain problems. Once a return is not filed, the next year is sometimes not filed either. That just makes the problem worse. One of the sayings that come to mind is, “When you are in a hole, the first thing to do is to stop digging.”
I’ve told some folks “it is sort of like having a splinter under your fingernail. It is going to hurt to pull it out, but that is the best thing to do.”
One local taxpayer came in and explained they had not filed income tax returns for the past two years. We prepared the returns and the clients filed them and paid a penalty for late filing (25 percent of the tax due). Because they had good explanations of the special circumstances (one parent died, they were caring for the other parent, they had illnesses of their own, etc.), we filed an appeal with IRS in Holtsville, N.Y., penalty appeals office. The IRS sent them a refund check, canceling the late-filing penalties.
Did you hear? “The best time to do something is between yesterday and tomorrow.”
John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Co. CPAs, LLC.