
What happens if I don't pay my taxes?  - kqr2
http://www.slate.com/id/2216218/
======
taxdodge
I didn't pay my taxes in 2000. I owed about $3000 federal and $3000 to
California.

California will eventually catch up with you (it took 7 years for me) and take
the money directly out of your checking account. They will send you letters
telling you that they are going to take the money out of your bank before they
do it.

The federal IRS will just keep sending you letters. It's worth paying up ASAP
because the interest is substantial. I ended up paying about $800 in interest.

None of these things ended up on my credit report, which was a relief but I
thought was a bit weird.

I've also heard that your passport won't be renewed if you owe the government
money. However, I'm not convinced the IRS and the state department are well
coordinated. I'm assuming it's more about preventing huge tax evaders from
fleeing the country.

~~~
yters
Is there a threshold that your interest account has to pass before the IRS
will take more drastic action?

~~~
sokoloff
I fell behind in filing by a couple of years back when I was doing a lot of
daytrading, and because of the way the IRS gets its data feed of stock sales,
but not associated cost basis, they were sending me bills for literally 7
figures of overdue taxes. (I'd done about $6mm of stock sales that year,
naturally with a cost basis of somewhere pretty close to that $6mm.)

They see $6mm in sales, treat it all as capital gains, compute the tax I owed
on it (and obviously hadn't remitted), stacked up huge penalties and failure
to timely file fees, etc.

When I finally got around to filing the correct information (you have 3 years
from the original due date of the return to file to claim a refund), they took
the updated schedule D information, and cleared the account.

In the 18+ months that they were sending me notices for over a million bucks,
they never took any further action. So, I don't think it's a dollar threshold,
but rather a time threshold at which point they start attaching wages,
subjecting you to backup withholding, etc.

Also, the stress totally isn't worth it.

------
gcheong
"Instead, they'll just file a tax return for you and charge you a fee for the
trouble."

Why can't I just check an 'opt-in' box somewhere and have this as the default?
It just seems inane that every year I have to go through this ritual of
copying numbers from one form to another form when the gov't already gets its
own copies. I mean, why can't this be automated where you get an intial
version from the gov't and if you want to file an amendment to correct or
include other items then you can but if you just accept the default you can do
that too? Too efficient maybe?

~~~
Devilboy
They do that in New Zealand. Your employer(s) send all your income details to
the tax department and at tax time the tax office just sends you a bill.
Pretty convenient by the sound of it.

~~~
shiro
Japan does that, even further. Your employer not only files for you but also
calculates all adjustments and pay you (if you paid too much tax) or deduct
from your wage (if you owe some). If you work for one company and have no
extra income, which had been typical for majority of Japanese until recently,
you'll never have to deal with the department of taxation.

But I think it has downside. Those who do not touch their own tax calculation
don't tend to think about taxes; most of my acquaintances when I was in Japan
had very vague idea of how much they paid for tax. After moving to US I
noticed that people are much more aware of tax they're paying, hence how the
government spends them.

I now even think Japan should make everyone file, like US.

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mdasen
It depends.

Most people have already paid their taxes and just have to file some paperwork
confirming it. Many people have overpaid and if they don't fill out that
paperwork, the government gets extra money. The IRS isn't going to care much
then.

If you owe a small amount of money (probably the most likely case) they are
going to care, but it's just not worth their while to deal too much with it.
By small amount of money, I mean like $100. At that point, they'll want you to
pay it, but it might cost them more to get you to pay it than the $100. Having
a staffer spend 3 hours dealing with you would probably wipe out that $100.
So, they'll take measures to make you pay, but they aren't going to waste too
much effort.

If you're underpaying your taxes by a good deal, they'll make your life hell
if you decide to brush them off.

The IRS operates similarly to how you'd expect - some things are worth their
time, others aren't. Yeah, there are always humorous stories about someone
getting a bill for less than a dollar, but overall the IRS wants to spend its
time chasing the money. That means going after the egregious violators who are
rich because those are easy to spot and have the most benefit to them. Going
after someone earning $50k who forgot to report $30 worth of interest income
on one of their bank accounts just isn't worth it.

~~~
kqr2
I noticed a potential "loophole" in interest income this year. If it's less
than $10 from a single institution, you don't need to report it. In fact, they
will not even issue a 1099. I called my bank and they confirmed that I don't
need to do anything.

So, in theory, you could have 100 bank accounts each with $9.99 interest and
not pay any taxes.

But then again, maybe having 100 bank accounts would automatically trigger an
audit.

~~~
tokenadult
_then again, maybe having 100 bank accounts would automatically trigger an
audit_

Don't you have to mention your Social Security number every time you open a
bank account? Yes, I think having 100 different bank accounts would get
attention from some government agency, perhaps the Department of Treasury
office that tracks money-laundering.

------
petercooper
I'm surprised to find that the tax situation in the US is so lax. Here in the
UK it's a massive and _very_ serious deal if you don't pay your income taxes
(to the point of people wrongly accused of not paying taxes being _declared
bankrupt_ within months and losing their homes, etc.)

Short lesson is, never, never, _never_ dick with the tax man if you're a
British tax payer.

~~~
jpwagner
The good ole USofA will be there soon enough...

------
mattmcknight
I have had requests from the IRS and state taxing authorities to garnish wages
for employees that didn't pay their taxes in both of the past two years and
were hit with liens. They send me a bill, due immediately, and then leave it
to me to subtract the funds from payroll to pay myself back. In one case it
was more than the total post tax payroll amount for the employee for the
month.

------
jpcx01
How stuff works has a good article that lists some of the late fees and
penalties [http://money.howstuffworks.com/personal-finance/personal-
inc...](http://money.howstuffworks.com/personal-finance/personal-income-
taxes/filing-tax-extensions.htm)

------
vaksel
I bet the author just made the "make sure to audit him" list.

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nazgulnarsil
don't worry about it too much. report and pay taxes on things that have a
paper trail, don't for things that don't. under reporting things for which
there is a paper trail isn't worth the effort.

------
scott_s
Do people really queue up at the post office still? I do all of my taxes
online. Granted, my income is low enough that the federal TurboTax online is
free, and the state I'm a resident in has its own online system.

~~~
ams6110
I always just drop mine in the mailbox. I don't file electronically because of
the fee. Hm, $10 (or whatever) to file electronically, or $0.42 to use the
mail? Easy choice.

~~~
vaksel
Proof that IRS received your information or worrying daily whether or not they
got it

~~~
Kadin
U.S. Mail with Delivery Confirmation is still cheaper, if your income is such
that you don't qualify for free e-File.

------
old-gregg
I wonder how state residency is enforced. NY has very high state income tax
and I'm thinking of getting an apartment there while keeping my house in
another state - how do I make sure that I won't be counted as NY resident?

~~~
nuclear_eclipse
Don't get a NY state ID. You have to file paperwork to become an official
citizen of New York (eg, your primary residence). My wife and I had to do this
when I moved from Ohio to NY for university. Naturally, I'm not a
lawyer/accountant/etc; contact a CPA for full information.

~~~
anamax
> Don't get a NY state ID. You have to file paperwork to become an official
> citizen of New York (eg, your primary residence).

I'd be surprised if NY was that lenient.

CA isn't. I know of cases where they went after folks who had no CA property
and hadn't been in the state for months before receiving income that CA wanted
to tax.

CA says that you're a resident after a small number of days for the purposes
of car registration. I'd be surprised if they were more lenient when income
was involved.

CA wants income taxes from folks who win money in golf tournaments or play
professional sports a couple of times a year in CA.

Residency is tricky. There's an infamous case where >100% of an estate was
owed in taxes because several states managed to claim that the deceased was a
resident of their state for the purposes of taxation.

~~~
chris11
That is how I thought it usually works. When you start filing paperwork with
the state, eg: getting a driver's license and renting, they try to tax you.

~~~
anamax
> When you start filing paperwork with the state, eg: getting a driver's
> license and renting

Renting doesn't involve filing paperwork with the state, at least not in the
US. (FWIW, ownership does not establish residency - you can own property in a
state where you're not a resident.)

My point is that states often think that you're a resident even if you haven't
filed any paperwork with them. Yes, there are cases (such as driving or
bringing a car into the state) where they penalize you for not filing
paperwork, but in others, they just tax you.

------
asnyder
Regardless of whether you pay your taxes or not, make sure you file them.
Failure to file has much larger penalties associated with it than paying late.

------
known

        * I pay TAXES. 
        * With them I buy CIVILIZATION.

------
jimfl
I am made to understand that the IRS will accept tea bags in lieu of the
balance owed.

------
darwinw
then you're not a patriot

~~~
anamax
Why are folks downvoting someone for quoting Vice President Biden?

