Will I Go to Jail if I Don't File Taxes?

A long standing practice of the IRS has been not to recommend criminal prosecution of individuals for failure to file tax returns, provided they voluntarily file, or make arrangements to file, before being notified they are under criminal investigation.  The taxpayer must make an honest effort to file a correct return to avoid criminal prosecution which could end in jail time.

The IRS wants you to voluntarily file your tax returns.  The IRS does not want to prosecute ordinary people who make a mistake.  However, flagrant cases involving criminal violations of tax laws will continue to be investigated and could possible result in jail time.

Call me, Gerald Yarborough, at (800) 270-8616 and we can discuss a plan to solve your tax problems.

Visit our website for more information about the IRS collection process.

The IRS Collection Process

What will the IRS do once they say you owe them some tax, even though you didn't file?

Let's say you didn't file and the IRS filed substitute returns for you. What then?

The IRS will then start what they call the "collection process." This is a process of many steps by which they intend to collect the amount they say you owe from the substitute returns they filed for you.

The process starts with a combination of three things. The sequence of these steps vary from situation to situation. The IRS can:

• File a Federal Tax Lien against any property that you own
• Garnish your wages if you are a wage earner. 
• Take your compensation (by Levy) from a client or company who owes you money if you are self-employed, or
• Levy your bank account

You may hear from a Revenue Officer who is an IRS employee assigned to contact you and collect the tax.

The IRS also shares the information they used to set up the taxes on you with the state taxing authorities. So if you live in a state with a state income tax, expect to hear from the state also who will have filed substitute returns for you based on the information they received from the IRS.

Make a move. Do something to avoid these actions by the IRS. Call me, Gerald Yarborough, at (800) 270-8616 and we can begin a dialog that will allow us to create a plan to solve your tax problem.

Visit our website for more information about the IRS Collection Process.

What Happens If You Don't File Your Income Taxes?

Those who haven't filed their tax returns sometimes wonder if the IRS knows they haven't filed, if they follow them everywhere they go, and if they will be confronted at a most inconvenient time and asked "why haven't you filed?"

Well, the good news is that the IRS is not following you.  But, the bad news is that they (the IRS) will likely discover that you haven't filed.

Typically, there will be a 2 or 3 year time lag between the due date of a tax return and the time the IRS contacts you on the matter.  It's even common for 5, 6 or 7 years to pass before the IRS catches up on non-filers.  And, imagine this:  I've met several people who haven't filed for 20 years or more and have never been contacted by the IRS!  Don't count on it, but it does happen.  But, the IRS is probably getting better at finding those who have not filed, given the capacity of this high tech world we live in today.

If you are one of the unlucky ones who do get caught, and my guess is that most non-filers will get caught, the IRS will file a "substitute return" for you.  This return is based on information the IRS has from other sources, such as 1099's, W-2's, etc.

The problem is that the IRS will file the return as if you are a single taxpayer, even if you are married and eligible to file a joint return.  You will not get any credit for dependents either.  No deductions will be used in computing the amount of tax you owe (such as the amount of mortgage interest you paid on your home), even if the IRS also has information on these items.  Sorry, you get no benefits for deductions.  You just get taxed on income items they know about.

If you are self-employed, you get no expense deductions for the cost of running your business.  No mileage, no cost of labor and no other "normal" business expenses.  If you sold your home or other real estate, you will be taxed on the gross sales price of the home or real estate that was sold.  No deduction for the cost of the property.  It's the same for securities that are sold. 

Basically, the tax is computed on the "gross amount" paid to you without any reductions that you may be entitled to, and, of course, this overstates your real tax liability. 

To add insult to injury, penalties and interest will be charged to you.  These "add-ons" are huge.  They can double the tax in just a couple or three years.  Multiple penalties add up fast.  Once these are added on, the IRS treats them just like tax and sets out to collect these "add-ons" just as if they were the same as the original tax owed.

Do something about this if you find yourself in this predicament.  Even if the IRS has already filed a substitute return, it still makes sense for you to file your own return to make sure you take advantage of all the exemptions, credits and deductions you are allowed.  The IRS will generally adjust your account to reflect the correct figures.

Call me, Gerald Yarborough, at (800) 270-8616 and we can start a dialog that can create a plan to get these returns filed and corrected. 

Visit our website for more information about filing delinquent income tax returns.

Sales Tax Holiday Weekend Aug. 3-5

The annual sales tax holiday in North Carolina is this weekend, beginning Friday, August 3 through Sunday, August 5.  Clothing, school supplies and computers are sold tax free during this time.  According to the NC Public Affairs Office in Raleigh, NC, tax free items are "clothing, footwear and school supplies of $100 or less per item; school instructional materials of $300 or less per item; sports and recreational equipment of $50 or less per item; computers of $3,500 or less per item; and computer supplies of $250 or less per item from sales tax.  Tablet computers and netbooks of $3,500 or less per item qualify, however eReaders do not."  Visit NCDOR's website for a complete list of items that qualify.

The holiday begins at 12:01 a.m. Friday and lasts until 11:59 p.m. Sunday. Participation in the sales tax holiday is required; retailers cannot opt out.

Please call NCDOR's Taxpayer Assistance Division at 1-877-252-3052 with questions.

What You Should Know About Audits

In any business, audit techniques will be different.  All small business owners need to be prepared in case of an audit.  Recently, Bonnie Lee of Fox Business News discussed this topic as it pertains to farmers in her article "What Farmers Need to Know About Audits".  Read more: http://smallbusiness.foxbusiness.com/finance-accounting/2012/06/27/what-farmers-need-to-know-about-audits/#ixzz210Lvps4N

New Office Opens in Pawleys Island, SC

In addition to its Charlotte, NC office, Gerald Yarborough, CPA now has an office in Pawleys Island, SC.

$28.5 Billion Tax Refund on NC Senate Floor This Week

Small businesses could receive a tax break, if the U.S. Senate can pass the Small Business Jobs and Tax Relief Act, an estimated $28.5 billion tax-refund program that will be on the Senate floor this week.
According to a recent study by Regional Economic Models Inc., the tax cut may create up to 1 million jobs nationwide, including 27,000 in North Carolina. Most of those jobs would be in health care, construction, manufacturing, finance and retail industries, the study says.

Read more about the Small Business Jobs and Tax Relief Act in today's Charlotte Business Journal.