U.S. Taxpayer Myths!

1. Not filing taxes will prevent the taxpayer from owing taxes. True or False. If the taxpayer owes taxes then he or she will owe for the failure to file penalty & the failure to pay tax penalty along with associated interest on both penalties for each year in violation. Note: Federal tax penalties & associated interest are separate from state tax penalties & associated interest, so the taxpayer usually has a dual tax problem involving both federal & state tax revenue departments from failing to file & pay taxes on time. In addition, the IRS will file a substitute tax return for you assessing you the highest possible tax liability.

2. If the taxpayer doesn’t owe taxes then he or she doesn’t need to file taxes. True or False. The taxpayer may still be entitled to a tax refund if he or she qualifies for certain refundable tax credits, so they should seek counsel from a tax specialist like an EA, enrolled agent or CPA, certified public accountant.

3. The IRS doesn’t pay taxpayers interest on their tax refund when it is received late. True or False. The IRS currently pays taxpayers interest to the tune of 5% APR, annual percentage rate on any tax refund that is received more the 45 days late from the due date of the tax return or from the date the tax return was actually filed… whichever is later.

4. The IRS paid more than $3 billion in interest payments to taxpayers in fiscal year 2021 for returning their tax refunds late. True or False. The IRS paid $3.3 billion in interest payments to taxpayers in fiscal year 2021 because they were late processing & sending taxpayers their tax refunds. The U.S. Government Accountability Office reported this & noted that it was up 33% from 2020.

5. If the taxpayer is a U.S. citizen or resident alien & he or she live & work outside the U.S. then they don’t have to pay U.S. income tax. True or False. If you are a U.S. citizen or resident alien & you live outside the United States, your worldwide income is subject to U.S. income tax regardless of where you live!

6. The IRS is the world’s largest & most powerful tax collection agency. True or False. The IRS is the largest tax collection agency in the world, collecting more than $2.4 trillion each tax year from 234 million annual returns.

7. If the taxpayer doesn’t file a tax return then the IRS will never know that they owe; so therefore, a personal tax liability will not exist, & the IRS can’t levy the taxpayer’s assets. True or False. The IRS will file a substitute tax return for you assessing you the tax liability at the highest tax rate possible enabling it to go to Automated Collections. Next, they will file a lien… then a levy resulting in wage garnishments, asset seizure or capture of future tax refunds, 2nd houses, 2nd & 3rd cars, IRA-individual retirement accounts, pensions, etc. “It gets ugly! “

8. The IRS is only civil in nature, & they only follow the money to fine taxpayers, but they can’t arrest taxpayers or take their freedom. True or False. In truth, the IRS has a criminal division too that investigates tax crimes & most of the crimes are referred from the civil division of the IRS, & taxpayers can be arrested or lose their freedom is serious cases. Note: The IRS is only the federal branch of the government & tax crimes often involve state laws that are violated as well, so a taxpayer involved in tax crimes can do federal & state time running the risk of having consecutive sentences!

For more helpful hints & tips go to www.SolidTaxServices.com/tax-tips

Discover all the benefits at www.SolidTaxServices.com

In Trust,

Ashley Thomas, EA, CEO