It is time to think about filing your US income tax return and paying the income tax that might be due. The failure to timely file the return can have significant civil as well as criminal penalties.

Civil penalties for not filing tax returns are related to the amount of unpaid tax. If a person files late and pays the taxes late, there are two separate civil penalties. First, for each month that the tax return is late a penalty of 5% of the unpaid tax is imposed. Thereafter, an additional 5% is added every month to a maximum of 25%. A second penalty is called a failure to pay penalty and adds 0.5% of the unpaid tax per month up to a total of 25%. In addition to these two penalties the IRS also charges interest that is compounded daily. Therefore, the addition of these penalties becomes even more severe because the amount of these penalties is then subject to the compounded daily interest rate applied by the IRS on unpaid tax plus interest and penalties. If the IRS believes that the failure to file was due to fraud, it can impose a 15% penalty per month up to a total of 75%.

The willful failure to timely file the US income tax return can subject the person to criminal prosecution. The penalty is a maximum of one year in prison. Each year that the tax return is not timely filed constitutes a separate crime.  For example, a person who is charged and convicted of willfully failing to timely file tax returns for three years can be sentenced to three years in federal prison.

A person’s home may also be adversely impacted for failure to pay income tax. One of the ways that the IRS seeks to insure payment includes filing of a tax lien that becomes a lien against the home. The IRS has the power to sell a home despite the Florida homestead protection. The filing of a tax lien is common, however, selling a person’s home to satisfy a tax liability occurs in limited cases.

Consequences of failure to file increase significantly for those who have failed to file US tax returns for several years. The chances of a criminal case being opened for multiple years of failure to file is much greater than being late for one year in filing. I’ve represented many people over the years who found themselves in a bad position with the IRS because they failed to file one year and then were afraid to file their tax returns in subsequent years. People who find themselves in this situation can avoid criminal prosecution; they should proceed carefully and with the help of an attorney experienced in dealing with criminal tax matters.

Law Offices of Mark L. Horwitz, P.A.
17 East Pine St.Orlando, FL 32801
P: 407-843-7733 • F: 407-849-1321