Most U.S. citizens and permanent residents must file tax returns. Many types of tax returns are required under particular circumstances -- gift tax returns, estate tax returns and corporate tax returns, for example. The most common type of tax return, however, is the individual income tax return. Misunderstanding tax return rules can cause you to pay more than you owe, sacrifice your refund or even incur tax penalties.
The IRS Can File Your Tax Return For You
If you don't file your tax return and fail to respond to notices from the IRS, the IRS may file a tax return for you. You will be classified as a single filer with no deductions. This is likely to result in a tax assessment that is far higher than what you actually owe.
It's Easy to Get a Filing Extension
In most cases, the IRS will grant you an automatic six-month extension to file your 1040 tax return, as long as you file form 4868 before April 15. Penalties and interest for failure to pay on time will continue to accrue, but there will be no penalty for filing late.
There's No Penalty For Filing or Paying Late If the IRS Owes You a Refund
Absent fraud or deliberate obstruction, IRS tax penalties are based on the amount you owe. This means that if you don't file your tax return on time, the IRS won't assess a penalty as long as it owes you a refund. You have three years from your tax return's due date to claim your refund.
It's Better to File on Time Even If You Can't Pay Right Away
The failure-to-pay penalty is 0.5 percent of the overdue amount per month, while the failure-to-file penalty is 5 percent of the overdue amount per month. For this reason, you may save money by filing a return even if you can't pay. Both penalties top out at 25 percent of the overdue amount.
You Can File an Amended Return If You Make an Error
If you discover an error on your tax return, you can file Form 1040X, an amended tax return, up to three years from the date you filed your original return or within two years of paying your taxes, whichever is later. If your only error was mathematical, you don't have to file an amended tax return -- the IRS will correct the error for you.
The IRS Can Fine You For Filing a Frivolous Return
If you file a tax return that relies on frivolous tax arguments to avoid tax liability, such as "the federal government lacks the legal authority to tax its citizens," the IRS can fine you from $500 to $5,000.
The IRS Might Require You to File Even If You Expatriate
You may be required to file a tax return and pay federal taxes for up to 10 years after you renounce your U.S. citizenship and move abroad. The IRS will require this only if you expatriated for the purpose of evading taxes.
You May Be Liable for Your Spouse's Tax Return Errors
If you file jointly with your spouse and your spouse prepares the joint return, you are both liable for any errors that result in underpayment. Under certain circumstances you may be relieved of liability under the tax code's "innocent spouse" provision.
You Can Go to Prison for Failure to File Your Tax Return
If you fail to file your tax return due to an intentional effort to avoid your tax liability, the IRS may seek to have you prosecuted for tax evasion, an offense punishable by up to five years in prison and a $100,000 fine.
The IRS Offers Free Tax Help
The IRS maintains two tax return preparation assistance programs -- Volunteer Income Tax Assistance and Tax Counseling for the Elderly. These programs help prepare income tax returns for qualifying taxpayers making less than $50,000 a year and taxpayers over 60, respectively. Both programs are free.
- Internal Revenue Service: Failure to File or Pay Penalties: Eight Facts
- Internal Revenue Service: Eight Facts About Filing Status
- Internal Revenue Service: Nine Facts on Filing an Amended Return
- Internal Revenue Service: Extensions of Timne to File Your Tax Return
- Internal Revenue Service: Frivolous Tax Submissions Subject to a § 6702 Penalty
- Internal Revenue Service: Expatriation Tax
- FindLaw: “Married Filing Jointly” is Not Always The Best Option
- Internal Revenue Service: The IRS Offers Free Tax Help
- Internal Revenue Service: What to Do if You Haven't Filed Your Tax Return
- Internal Revenue Service: Frequently Asked Questions For Past Due Return Filers
- Law Office of Williams & Associates: Tax Collection Attorneys
- Internal Revenue Service: Extension of Time to File Your Tax Return
- Internal Revenue Service: Free Tax Return Preparation for You by Volunteers
David Carnes has been a full-time writer since 1998 and has published two full-length novels. He spends much of his time in various Asian countries and is fluent in Mandarin Chinese. He earned a Juris Doctorate from the University of Kentucky College of Law.