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As the IRS faces cutbacks, some taxpayers are weighing whether to file returns this season.
But skipping your federal filing can be costly, experts say.
Josh Youngblood, an enrolled agent and owner of The Youngblood Group, a Dallas-based tax firm, said he’s had a few clients ask whether they need to file this year.
“I’m concerned we’re going to see more of this” amid IRS layoffs and calls to eliminate the agency, he said.
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Last week, the IRS faced mass layoffs as Elon Musk’s Department of Government Efficiency, or DOGE, continued to seek federal spending cuts. Meanwhile, Commerce Secretary Howard Lutnick told Fox News that President Donald Trump wants to “abolish” the agency and replace it with tariffs.
The uncertainty could contribute to taxpayers’ filing delays.
As of Feb. 14, the IRS received about 5% fewer individual returns compared to about the same point last season, according to the agency’s latest filing statistics.
Penalties for ‘tax protestors’ can be hefty
There are various reasons why some taxpayers don’t file returns, according to Syracuse University law professor Robert Nassau, director of the school’s low-income tax clinic.
In some cases, they may think “[the IRS is] never going to find me” or “they’re frightened and overwhelmed by the prospect of owing money,” he said.
Another category of non-filers or filers who deliberately underpay, known as “tax protestors,” argue federal taxes are unconstitutional or don’t apply to them, said certified public accountant Mark Kohler.
“There’s this whole laundry list of weird arguments that never work,” he said.
Tax protestors issues can lead to tax court and penalties can be hefty, experts say.
If you file a return without enough information to calculate the correct tax liability, you could be subject to a $5,000 civil penalty for filing a “frivolous tax return,” according to the Internal Revenue Code.
“Like moths to a flame, some people find themselves irresistibly drawn to the tax protester movement’s illusory claim that there is no legal requirement to pay federal income tax. And, like moths, these people sometimes get burned,” a circuit judge wrote in United States v. Sloan.
Avoid the ‘failure to file’ penalty
Whether you’re protesting the government or avoiding taxes owed, non-filers can expect IRS penalties, experts say.
The “failure to file” penalty is 5% of your taxes owed per month or partial month the filing is late, capped at 25%, according to the IRS.
That’s “ten times worse” than the “failure to pay” penalty, which is levied at 0.5% of your tax balance per month or partial month, also limited to 25%, Nassau explained.
If you owe taxes, it’s cheaper to file your return on time, or file an extension, and work out a payment plan with the IRS, he said.