As the IRS deals with budget cuts, some people are starting to question whether they should bother filing their tax returns this year. However, experts warn that skipping your federal tax filing can lead to significant expenses.
Josh Youngblood, who runs The Youngblood Group, a tax firm based in Dallas, mentioned he’s had a number of clients wondering if filing is necessary this season. “I worry we’ll see more of this hesitation,” Youngblood noted, especially with the recent IRS staff reductions and discussions about eliminating the agency altogether.
In Personal Finance news, experts advise filing taxes early to avoid issues. The recent cuts at the IRS might affect your tax filings and potential refunds. Interestingly, early data indicates that average IRS tax refunds are presently over 32% lower than last year.
Last week, the IRS experienced mass layoffs because of efforts from Elon Musk’s Department of Government Efficiency to trim federal spending. Meanwhile, Commerce Secretary Howard Lutnick shared on Fox News that President Donald Trump is considering replacing the IRS with tariff-based revenue collection. This uncertainty might lead to taxpayers delaying their filings.
As of mid-February, the IRS reported receiving about 5% fewer individual tax returns compared to the same period last year.
Many factors contribute to why some people don’t file their returns, according to Robert Nassau, a law professor at Syracuse University who oversees the school’s low-income tax clinic. Some folks believe, “the IRS will never find me,” while others feel anxious about potential debts. Additionally, there’s a group known as “tax protestors,” who claim that federal taxes are either unconstitutional or simply don’t apply to them, points out Mark Kohler, a certified public accountant. However, he adds, “These arguments never succeed.”
Tax protestors who end up in tax court often face steep penalties. If you submit a return lacking enough details to determine the accurate tax amount, you might incur a $5,000 civil penalty for a “frivolous tax return,” as per the Internal Revenue Code. A circuit judge in the case United States v. Sloan remarked, “Just like moths to a flame, individuals can be tempted by the false claims of the tax protester movement, believing wrongly there is no legal obligation to pay federal taxes, often resulting in them getting burned.”
Ignoring tax obligations, whether out of protest or other reasons, typically leads to IRS penalties, say the experts. The “failure to file” penalty is a hefty 5% of your owed taxes for each month or part of a month that your filing is late, maxing out at 25%. It’s a hefty penalty compared to the “failure to pay” penalty, which is 0.5% per month or part thereof, as Nassau explains.
“If you owe taxes, it’s far more cost-effective to file your return on time or seek an extension,” he advises. “Then, work out a payment plan with the IRS.”
