I think the IRS would be happy if someone doesn’t ask for a refund. But the government can be unpredictable. Could they actually take action against you?
No one is getting in trouble for not claiming a refund.
Sometimes people don’t owe anything but still need to file to show this. A common issue comes from stocks or crypto: the IRS sees you sold $50,000 worth but doesn’t know you bought those stocks for $60,000 and lost $10,000.
If you don’t file, the IRS will ask for taxes on that $50,000.
@Sky
Payments that are withheld aren’t counted as payments. Even if you have federal tax withheld from a W2 or 1099 to make sure you pay on time, the IRS keeps that money in their account (that’s why you don’t see payments on your transcript like you would if you sent in estimated payments). So I filed in May. The money from my paycheck, which was paid all year and was more than I owed in taxes, was recorded in May but has an April 15 received date. Publication 746.
The penalty must be based on what you owe. If you owe zero, you can’t be penalized (Form 1040). Corporate taxes are different.
Sometimes you must file even if you won’t owe anything. For instance, if you had subsidized health insurance (like ACA insurance from Healthcare.gov).
If you had ACA insurance and don’t file, the IRS will send you a letter.
@Jo
It’s true. You want to start the clock on the statute of limitations.
If you wait too long to file, you won’t be able to get a refund of any withheld taxes.
Aspen said:
If you wait too long to file, you won’t be able to get a refund of any withheld taxes.
You can only go back three years to claim a refund.
There is a filing requirement. The IRS doesn’t have all the info for everyone, so if you are over the limit, file a return.
You MUST file if you had marketplace insurance or if you have self-employment income over $400. Also, some people think their income isn’t taxable when it really is. That hardship distribution from retirement is taxable. The stock loss isn’t, but the IRS doesn’t always know it’s a loss.
The IRS expects employees to file.
Phoenix said:
The IRS expects employees to file.
Do IRS employees have to file, or any employee? Because any employee making under a certain amount doesn’t have to file and could use exempt on their W2 to avoid filing for a refund of withheld tax.
@Davis
The IRS expects its employees to follow tax laws. Employees can use all deductions and credits like anyone else. The one exception is that every employee must file a return even if a non-employee in the same situation wouldn’t have to. This is because the IRS needs to see the return to ensure compliance.
The IRS doesn’t set the rules for everyone else. Congress and the Treasury do. IRS Publication 501 explains who must file in detail.
Even if you aren’t required to file, it’s usually smart to do so. It reduces the risk of the IRS coming after you years later when you don’t have proof that you owed no tax. Filing starts the clock on the IRS’s time to assess tax for that year (usually three years after the return is filed or due date, whichever is later).
They don’t care if they owe you money.
There are rules. Look up ‘filing requirements.’ Being owed a refund isn’t one of them.
Many people don’t need to file.
Yes, file.
I see a lot of comments about the IRS, but my issue is with state tax. The IRS accepted my taxes, but I haven’t heard anything from California about my taxes, and I moved to Washington this year. They owe me about $200.
Yes, you could get in trouble because not filing taxes might suggest you’re trying to hide income. It could lead to a messy audit, wasting your time and money and causing stress. Better to file even if you don’t need to, as it limits penalties and future issues.
So, probably no prosecution, but messy audits and penalties could happen due to mistakes. Best to file.
There’s no penalty if you don’t owe money. They wouldn’t prosecute you even if you did owe; they would just take it from your bank account.
But not following the law could make you look bad in other situations. You might get turned down for a mortgage, school aid, or government benefits.
No. If you think you overpaid, you can file anytime.
If you calculated zero tax liability, the IRS prefers you not to file. Only file if you expect to get money back.
ace said:
No. If you think you overpaid, you can file anytime.
If you calculated zero tax liability, the IRS prefers you not to file. Only file if you expect to get money back.
I suggest everyone file, regardless of income level or expected refund. You never know when you’ll need proof of income for a loan or benefit program, and getting past tax returns takes time.
@Sky
It also protects you from identity theft. Even if you don’t have to file, if you can do it for free (with free software or a prep service like VITA or Tax-Aide), why not file?