The IRS has what is called the Streamlined Process for filing past due returns and possible penalty relief if they have a valid reason and “Non-Willful” conduct.
Under the IRS Streamlined Filing Compliance Procedures, taxpayers must certify that their failure to file was “non-willful,” meaning they did not intentionally avoid filing tax returns. The IRS recognizes a range of situations where taxpayers might fail to file, but where the failure is not due to willful intent. Some common examples of non-willful reasons for not filing tax returns include:
1. Unaware of Filing Requirements
- Lack of knowledge: The taxpayer was unaware that they had to file tax returns, especially if they were new to the U.S. tax system or unfamiliar with their filing obligations. This could apply to a first-time taxpayer or someone who misunderstood their filing obligations.
2. Unintentional Mistakes
- Inadvertent errors: The failure to file or report was due to a genuine mistake or oversight, such as forgetting a filing deadline, not including all income, or submitting incomplete information.
- Incorrect advice: A taxpayer may have received incorrect or incomplete advice from a tax professional or accountant regarding their filing requirements, leading to non-compliance.
3. Health or Personal Issues
- Illness or medical reasons: Serious health problems or a long-term illness may have prevented the taxpayer from filing their taxes on time. This could include hospitalization, physical incapacity, or mental health issues that made it difficult to keep track of tax obligations.
- Death of a close family member: If a taxpayer was dealing with the death of a spouse, parent, or another close family member, it might have delayed their ability to file taxes on time, especially if they were the primary person managing the finances.
4. Financial Hardship or Uncertainty
- Financial distress or poverty: In some cases, individuals may fail to file because they are struggling with financial hardship, such as unemployment, living in poverty, or experiencing extreme financial stress, leading them to prioritize other immediate needs over tax filing.
- Lack of ability to pay: Some individuals may not have filed because they were unsure how to deal with an inability to pay taxes owed, especially if they feared they would face heavy penalties for non-payment.
5. Relocation or Life Changes
- Moving to another country: Taxpayers who move abroad may not have been aware of their continued U.S. filing requirements, especially if they were unfamiliar with the U.S. tax system or the Foreign Bank Account Report (FBAR) rules.
- Separation or divorce: A taxpayer may have experienced a significant life change, such as a separation or divorce, which caused them to lose track of their filing obligations.
6. Language Barriers
- Language difficulties: Non-English speaking taxpayers or those with limited English proficiency may have failed to understand their tax obligations because tax-related communication was unclear or inaccessible in their primary language.
7. Mistaken Belief of Non-Filing Status
- Non-resident status misunderstanding: A U.S. citizen or resident abroad might assume they don’t need to file U.S. taxes because they mistakenly believed their foreign residence or income didn’t require reporting, or they misunderstood whether they had met the substantial presence test.
8. Confusion with Filing Deadlines or Extensions
- Filing deadline confusion: Some taxpayers may miss filing deadlines due to confusion about extensions or miscommunication about when the returns were due, especially if they relied on incorrect information regarding filing extensions.
9. Dependency or Income Reporting
- Omitting income or dependents inadvertently: The failure to report certain types of income or claim deductions due to oversight or confusion (e.g., the taxpayer may have earned minimal income or received child support but didn’t realize it needed to be reported).
10. Tax Simplification or Lack of Income
- Assuming low income exempt from filing: A taxpayer may have believed that their income was below the filing threshold (for example, they earned less than the minimum required to file) and thus did not file.
In all cases, the taxpayer must provide a certification of non-willfulness when applying for the Streamlined Filing Compliance Procedures. While these reasons do not guarantee acceptance, the IRS will typically consider whether the non-filing was due to an honest mistake, misunderstanding, or extenuating circumstance, rather than intentional tax evasion.
It’s important to note that if a taxpayer is found to have been willfully avoiding tax filing or evading tax obligations (e.g., by intentionally failing to file returns or making false statements), they will be ineligible for the Streamlined procedures, and they may face severe penalties.
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