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So, You Are a Non-Filer

by Yolanda Smulik-Roche Roche |  Published: Jan 30, 2004


You just cannot get it together to file your tax returns. Every year you promise yourself that this will be the year that you will get current with the IRS by filing all of your delinquent tax returns as well as your current year's return. What if you really got it done? What a relief! There'd be no more lying awake at night worrying about what would happen if the IRS caught up with you. Would the IRS take everything you own? Would they charge you with criminal fraud and would you end up with a jail sentence? Has it ever occurred to you that not filing might be affecting your play? Can you really ignore those letters from the IRS that demand payment of taxes, penalties, and interest for those past years you did not file? Is it working on your subconscious? Now is the time to make the decision to come clean and get current. If you let it slide now, you will be worrying for another year. What is it going to be? It's up to you.

If you choose to get current with the IRS (and your state, where applicable), where do you start? Of course, we recommend that you seek professional help. By that we mean a licensed and experienced tax preparer, such as an Enrolled Agent, who is licensed by the U.S. Treasury Department to practice before the IRS, in all states and is required to complete 16 hours a year of continuing education courses in the field of taxation. CPAs and lawyers are also licensed to practice before the IRS but their practice is limited to the states in which they are licensed to practice. They also have continuing education requirements to renew their licenses, but there is no stipulation that the courses have to cover some aspect of the tax laws. If you cannot afford a professional, you can do it yourself, but it is our belief that you cannot afford not to use a professional. By utilizing one of the professionals described above, you do not have to talk to anyone at the IRS, as your representative does all the talking. Be sure to choose a representative who is experienced in dealing with non-filers.

There are basically two types of non-filers. The first is those who do not owe anything because they either did not reach the threshold of taxable income or were due a refund because they overpaid their withholding or their estimated tax payments for the year. The other is those who owe overdue taxes, penalties, and interest.

If you fall into the first group and you did not reach the threshold, you do not have to file. You may want to file if the IRS is sending you letters, probably because you had filed in the past, just to let them know you are not required to file. If you reached the threshold, and overpaid and are due a refund, you by all means want to file to get your refund. Do not wait too long. In order to get a refund, you must file your tax return within three years of the time the return was due, or within two years of the time the tax was overpaid, whichever is later.

If you fall into the category of receiving enough income that you owe tax and no or insignificant withholding or estimated payments were made, and you failed to file your return, you should take action as soon as possible. The minimum penalty for failure to file and for failure to pay are separate. Each is 5 percent a month of the tax owed, up to a maximum of 25 percent of the tax owed. Interest is accrued daily on the overdue amount. This adds up very quickly, and before you know it, you owe three or four times the original penalties. Also, the IRS can easily charge additional penalties, such as for tax evasion, fraud, and negligence, which will make the total you owe astronomical compared to what you originally owed. These additional penalties are often levied at the discretion of the IRS agent, and are oftentimes assessed just to sock it to you. This is why we recommend that you obtain competent professional representation to interface between you and the IRS. Having experienced representation can often pay for itself in penalties that are negotiated to lower amounts or in penalties not imposed because of the experience of your representative. Knowing how to deal with IRS agents in order to minimize "the damage" is what an experienced and savvy tax professional brings to the table.

Well, all of this is well and good, but perhaps you have not been filing because you cannot pay. When we "bring in" a non-filer, we first file all of the delinquent returns the IRS wants. Once they have processed your returns, they will send you a notice, one for each year, of what you owe as of the date of the letter, including penalties and interest. At that time, we know the total amount they want. The first option is to negotiate a monthly payment plan that can be set up for up to five years and sometimes longer. The second is to submit an Offer in Compromise, in which it is requested that a certain portion of what you owe be accepted as payment in full. We all have heard the "pennies on the dollar" commercials, but it does not very often get that low. We negotiate an amount based upon what you owe, what income you can expect in the future, and what it is costing you to live.

We hope we have reached some of you, and that you will end your cycle of

If you have any questions regarding tax regulations as they apply to gaming that you would like to see answered in Card Player, please mail or e-mail them to us ( We will keep your identity confidential. If you would like to utilize our professional services or order our book, The Tax Guide for Gamblers, please call (800) 829-7271. R.B.S. will prepare your return without your having to leave the comfort of your home, no matter where you live.