Find Out if You Are Legally Obligated to File a Tax Return

In the year 2020, due to the COVID-19 pandemic, the federal government extended the yearly federal tax filing deadline from April 15, 2021 to May 17, 2021. For some, this extension has made tax season a bit less stressful, but there is no such thing as a completely stress-free tax season. This time of year is notorious for leaving taxpayers across the nation with many questions. Some people are not sure what income they need to file taxes on, some are not sure what filing status to choose or if they have dependents, and others are uncertain as to whether they need to file taxes at all.

Knowing what tax bracket you are in is another ballpark in and of itself. If you only have a few deductions, sources of income, and investments, you might be able to use some of the popular tax software options instead of an accountant. However, if you earn more than $500,000 a year or have some major tax-related questions, hiring an accountant can help answer these questions and reduce your risk of an audit.

What some people do not know is that not everyone needs to file an income tax return every year. There are certain income thresholds you need to meet in order to be faced with this requirement. This is where the standard deduction comes into play. When we talk about the standard deduction, we are referring to the portion of income not subject to tax that can be reduced to the tax bill. The deduction amount increases slightly each year to keep up with inflation, but in the year 2021, the amount is $12,550. This means that you do not need to file a tax return if you meet the following criteria:

• You are under the age of 65
• You are single
• You do not have special circumstances that require filing, like self-employment income
• You earn less than $12,550

What Happens if You Don't File Taxes?

If you are legally required to pay taxes and you do not, you have committed the tax crime known as “tax evasion.” Tax evasion is a federal crime, which makes it a serious offense that can come with large penalties. You are most likely to face these charges if you are selected for an audit. The IRS conducts approximately 300,000 earned income tax credit (EITC) audits per year. Your chances of being audited by the IRS increase if you have data entry errors in your tax return, if you have unreported income, if you have overstated deductions or have unreasonably high deductions, if you filed under the wrong status, claimed non-existent dependents, claimed earned income credit, or are self-employed. If the IRS auditor detects possible fraud during an audit, criminal investigations can begin.

Before pressing criminal charges, however, the IRS will typically work with you in order to reach a settlement. In cases of a simple lapse in responsibility or forgetfulness, the IRS will be more forgiving. If you earn your income in illegal ways or are engaging in behavior that seems fraudulent, the IRS would be more likely to press charges. Furthermore, someone who fails to file tax returns repeatedly despite being contacted by the IRS would be likely to face prosecution.

To convict you of a tax crime, it is not necessary for the IRS to prove the exact amount you owe, but they are usually able to uncover this information during a tax audit. If the IRS has reason to be suspicious of criminal nonpayment or underpayment of taxes, a primary investigation will begin with the goal to determine whether charges should be filed. The agenda of a primary investigation is to allow the agent to decide whether or not it is necessary to proceed with the investigation. The agent's supervisor can agree with their decision or push back, which will ultimately determine whether or not an investigation will continue. If the supervisor agrees to continue the investigation, it will be brought to the head of the office, who will determine whether to continue with a subject criminal investigation.

If the IRS decides to conduct a subject criminal investigation, they will then study documents and affidavits from third parties, like friends, family members, and co-workers. They might also utilize search warrants, subpoenas of bank records, and other important financial information. Once all of this information has been gathered and reviewed by the special agent and their supervisor, they will determine whether or not to continue with prosecution. If the IRS decides to prosecute the individual, then the special agent creates a report that is to be reviewed by the supervisory special agent, the criminal investigation review team, the criminal investigation assistant special agent in charge, and the criminal investigation special agent in charge.

The criminal investigation special agent in charge's duties are as mighty as their title makes them out to be. This is the person who gives the recommendation to prosecute, which is sent to two final levels of review. After the investigation passes the Department of Justice, Tax Division and the U.S. Attorney, the individual will be faced with tax evasion charges.

Can You Appeal an IRS Decision?

As you can see, the IRS has a meticulous way of operating. The good news is that in most cases, taxpayers have the right to a fair administrative appeal, and they generally have the right to take the case to court. The Taxpayer Bill of Rights, which was enacted in July of 1996 as an Act of Congress, makes the following statement: “Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including many penalties, and have the right to receive a written response regarding the Office of Appeals' decision. Taxpayers generally have the right to take their cases to court.”

If you would like to appeal the results of an audit or an IRS collection action, hiring a tax attorney like Jarrett Ambeau from The Ambeau Law Firm can help your case. For example, a tax attorney will be able to cross-examine the IRS officers and agents to find any communication gaps or potential errors. A tax accountant is helpful when it comes to filing your taxes, but they can also be forced to testify against you in court. A tax attorney, on the other hand, wants the case to work out in your favor and is motivated to present your case in a positive light. We can help your situation by simply reciting the facts of your case in a favorable way.

All hope is not lost if you are faced with an unpleasant IRS decision. An IRS attorney can help negotiate with the opposing counsel, which can lower your tax liability and produce the most favorable outcome for your case. If you would simply like representation through a tax audit or help removing IRS penalties, a tax attorney can assist with this as well. During a tax audit, a tax attorney can represent you and make sure the IRS has made an accurate assessment.

The truth of the matter is that a tax attorney is simply more familiar with the best ways to communicate in these cases than the average individual would be. Attending an audit by yourself puts you at risk of disclosing more information than what you are legally required to say, which can elongate the audit process. A tax attorney also has the skill necessary to negotiate the lowest possible tax settlement if this is what you need. Nobody wants to pay the IRS more than they need to, and a tax attorney can prevent that from happening. Sometimes, during an audit, you will need to negotiate their deductions. Having a skilled tax attorney on your side will be your best bet when it comes to challenging unfavorable decisions from the IRS. 

If you are having trouble with your taxes, do not hesitate to get the legal representation you need today. For a free and confidential case evaluation, call The Ambeau Law Firm at (225) 330-7009 or contact us online.

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