(Bloomberg Business) — People fail to file their tax returns for all sorts of reasons. A nasty divorce. A death or illness in the family. An addiction of one kind or another. Some people can’t face the paperwork, or just don’t want to. It’s impossible to know how many tax evaders there are, but tax preparers and accountants say that there are many who have been keeping it up for years, hoping the IRS won’t notice.
There’s a good chance, it won’t — at least, not for a good, long while. But the government usually catches up with non-filers eventually. Here’s what happens when you just don’t file your taxes.
At first, nothing
Every time a person gets a W-2, a 1099 or other tax form, the IRS also gets a copy, and its computers analyze them to see who’s failed to file. If you’re owed a refund (or refunds), the IRS doesn’t particularly care if you don’t file. After three years, though, you no longer have a right to your refund. The system does flag taxpayers when it’s clear that they owe money, but even that can take the agency a few years, says Jonathan Bochese of the Tax Defense Network. Tax documents triggered by a home sale, a loan or a stock transaction can pique the IRS’s curiosity, too.
You probably won’t go to jail
Going to prison for tax fraud, which is how the IRS classifies not-filing, is very rare, says Cindy Hockenberry of the National Association of Tax Professionals. After all, if you go to jail, you can’t work, which means the IRS can’t seize the money you owe from your paycheck.