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Non-filer investigations: an FAQ

Every year, millions of people don't file required income tax returns.

If you haven't filed, you therefore have plenty of company. But it's important to be aware of the potential consequences for non-filing.

One such consequence is stiff civil penalties for failure to file. Another possible consequence of not filing is to become the target of a non-filer investigation by IRS.

In this post, we will use a Q & A format to discuss these investigations, which can potentially lead to criminal tax evasion charges.

How common are non-filer investigations?

In its annual report for 2016, the Criminal Investigation (CI) division of the IRS reported 206 non-filer investigations.

This is not nearly as many as for investigations into money laundering, identity theft or Bank Secrecy Act violations. But non-filer investigations are a category that the IRS tracks - and they can lead to very serious criminal charges.

What prompts non-filer investigations?

Many non-filer investigations result from the IRS using technology to match returns with information received from third-party sources such as employers and banks.

If this third-party information indicates you should have filed and declared a certain level of income, this can raise red flags for the IRS.

What types of charges can result from a non-filer investigation?

The charges that arise from non-filer investigations can include willful tax evasion and willful failure to file a tax return.

Other charges are possible as well, such as fraud or "corruptly endeavoring to impede" the Internal Revenue laws.

Does the CI actually bring charges?

No, the CI merely makes a referral to the Department of Justice (DOJ). It's up to the DOJ to decide whether to prosecute.

Can a conviction on the charges bring prison time?

Yes. A conviction can also result in an order to pay a large restitution award. The IRS lists many such non-filer cases on its website.

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