A quirk in federal tax law may be incentivizing wealthy people who want to avoid paying taxes to simply not file their returns. That’s because it’s a felony to file false tax returns but only a misdemeanor not to file a return at all.
And due to limited IRS and Department of Justice resources to pursue misdemeanor violations, a person who does not file a return is unlikely to face prosecution. As a result, many millionaires could simply be taking their chances, betting that they will face few consequences for not filing their tax returns.
In early 2024, the IRS began an effort to contact people it calls “high income non-filers” and urge them to file returns to the tax agency.... Notices were mailed in February in 125,000 cases targeting wealthy taxpayers who had not filed tax returns since 2017.
I wonder if this trick works for non-millionaires? I'm asking for a friend. And I'll bet it will get easier pretty soon as Donald Trump and his handpicked IRS commissioner ease up on those pesky new Democratic rules aimed at collecting more unpaid taxes from the rich. They'll probably reallocate the agents to go after people who cheat the feds out of $50 on their EITC returns. Those folks really piss me off.
Also, it sure seems like someone should have told Hunter Biden about this. If he had just stonewalled on filing his 2018 return, like he did for 2017, the case against him would have been entirely misdemeanors.
So as a general rule I get money back from my federal filing, and to change that I'd need to change info on my W-2. Would upping my dependents from zero to nine on my W-2 even tho I don't have nine dependents count as filing a false tax return or would it require actually submitting the tax return indicating I had nine dependents be the felony?
Asking for me.
Yes it would count. Tax fraud applies to any tax form, including a W-2. Really rich people don’t earn wages so they don’t file W-2s either.
There are other ways to decrease your withholding.
https://pocketsense.com/avoid-owing-tax-return-8455.html
Fraud is fiddling with your taxes to avoid paying legally owed tax. So, increasing your dependents on your W-4 in order to decrease your withholding so that it is more in line with your actual tax liability is not fraud.
They get mad if you withhold the incorrect amount, either way.
You can increase the number of dependents to reduce your withholding. Many people did that when they had a large mortgage (DJT's tax cut capped mortgage expenses for the little people at $10K) that would significantly lower their AGI. However, if you owe more than $1000 in taxes at the end of the year you might receive a bill for a penalty and interest. Usually you just pay interest unless you repeatedly owe money.
I thought the $10,000 cap was for SALT (state and local taxes). Mortgage deduction is based on value of mortgage. Still, IRS should be going after the high income people. After all, that's where the money is.
There’s a mortgage deduction limit (you can deduct interest on $750,000 of mortgage debt but no more) along with a SALt limit of $10k that were both imposed by the Trump tax revisions. (Calling them “cuts” isn’t true for everyone, as upper middle class people in high SALT high mortgage states learned.)
This is not something that will help wage and salary-earners, which is most people. Their taxes are deducted as they go along, and usually the deductions are greater than the taxes owed, so if they don't file they don't get a refund.
People at the lower end may not owe any income tax anyway.
Yes it’s another example of how it takes lots of money to be able to cheat the IRS out of lots of money and get away with it.
Technically speaking, people who don't owe taxes don't need to file a tax return, rich or poor alike.
Lots of rich people hide their assets abroad or transfer assets to trusts, all to make it look like they're not actually earning much income.
I don't know about those technicalities and what relation the law has to information meant for the hoi polloi, but last year's 1040 instructions say that whether you have to file or not is broadly based on gross income and filing status but can also depend on some very arcane points. The highest income threshold that triggered the need to file was 30,700 (joint filers 65 or older), the lowest was 5 (married filing separately, all ages). Presumably, because of standard deductions, etc, these are the income levels that trigger possible taxability.
This is incorrect. You still need to file. If you don't, eventually the IRS will start sending you nasty letters. Given the staffing levels currently in the IRS, eventually may be long after you're dead, but it's still required. If you file late, there is a penalty and interest on taxes due, but if you don't owe, there's no penalty or interest. But you still have to file.
No, no they don't.
They only send you letters if you didn't make sure to keep your balance with them positive.
Hunter Biden. Yeah. Did not file for a few years.
Felony prison charge. For a great business strategy misdemeanor. At least, for all the rich Republicans.
That’s because it’s a felony to file false tax returns but only a misdemeanor not to file a return at all." As Hunter biden found out, it is a felony to wilfully not file your income taxes. "And due to limited IRS and Department of Justice resources to pursue misdemeanor violations, a person who does not file a return is unlikely to face prosecution. " A first offense of not filing your taxes is always pursued as a civil offense and does carry heavy fines. Unless, of course your last name is Biden.
"Also, it sure seems like someone should have told Hunter Biden about this." that's completely false.
That's not what Biden was charged with. He was charged with not paying, not the lack of filing.
Your statements are false and misleading.
Terrible idea. Nonfiling is a misdemeanor but a pattern of failing to file without reason or excuse can show fraud. Rarely used for criminal fraud cases, it’s common for civil. That’s a 75% penalty.
I worked for 27 years in the IRS. The problem you'd run into, Kevin, is that your income is reported to the IRS via W2s and 1099s. The IRS CP-2000 program (mostly automated) will notice your lack of a return and send you several warnings. Then it will automatically generate a return for you (called an SFR, for substitute for return), assess the tax and penalties (late filing, late payment, and interest) and begin the collection process which culminates in automatic levies and seizures. Your credit score drops to zero. You begin to doubt your chosen path.
No, it doesn't.
They don't warn you until there's an unpaid bill and they want to be paid.
But without a tax return, there's no way to prove it's been paid or not or even what you owe.
Which is dumb. They should share what they know.
Oh, and this seems pertinent, from IRS.gov, regarding the tax avoiders in question:
"These are all cases where IRS has received third party information—such as through Forms W-2 and 1099s—indicating these people received income in these ranges but failed to file a tax return. Without adequate resources, the IRS non-filer program has only run sporadically since 2016 due to severe budget and staff limitations that didn’t allow these cases to be worked. With new Inflation Reduction Act funding available, the IRS now has the capacity to do this core tax administration work."
Thank you, Joe. Thank you, Democrats.
You can see why the Republicans all fought this additional funding for enforcement. How's a man to implement a brilliant, out of the box business strategy with the "enforcers" watching?
Kevin, a few years back I had the opportunity to confront the then-Commissioner about this, and he gave me some IRS-speak that boiled down to this: the millionaires fight them in court, but the EITC filers don't, so enforcing the former costs a lot over many years, while the latter takes a single letter.
It's all about cost-effectiveness.
Awful.
Personal experience: they randomly grab money from your account, with no recourse. Filing is the only defense. And banks will pick your pocket, on top of the IRS.
The IRS doesn't "randomly grab money from your account." They take the actions necessary to collect funds from citizens who have failed to pay their legal tax obligations.
Current estimates are that tax avoidance costs the nation some 600 billion a year.