Me: "How much?"
Govt: "You figure it out."
Me: "Oh, I get to pay whatever I want?"
Govt: "LOL, no, we have a figure that we want you to pay."
Me: "What happens if I guess that number wrong?"
Govt: "You get to go to prison."
It’s more of a, “Pay what you believe you owe based on your best guess and the laws as you best understand them, and if we disagree we may ask you to pay more.”
The opposite can happen, too. The last time they disagreed with me on how much tax I should have paid, they mailed me a check for the difference.
Because that's what they take from you if you underpay (by accident or not).
Living in the US is like: "oh you were born and live in the US? We're forcing you to give us a huge chunk of your earnings for your entire working life, make it close to impossible to determine the exact amounts and then fine you 5% interest if you happen to underpay, but we'll never give you interest if you overpay.".
Edit: Well, as mentioned the tax system is super complex here and I obviously don't know the rules for every case. It seems in SOME cases you do get interest when the IRS owes you money but personally I've never seen this, where as I've always had to pay x% interest if I ever owed anything.
Sure, the gov't cashed the check and held on to the money for like two months, but the interest at the end was a pleasant surprise.
Also, it sounds like you're referring to the penalty for underpayment, which I believe is currently 3.6% of the total underpayment for the year [0]. This only kicks in under certain circumstances.
Because this year I got hit by some underpayment penalties (with interest added on top) but at the same time I also got a refund which had no interest applied to it.
That is being self employed and paying estimated taxes every quarter.
I realized that several years back, I had worked at a temp job for a very brief time and I probably never got a W-2 and therefore never paid taxes on it. Thus, I called up the IRS, got the W-2 information which they had, and duly filed an amended return with a check for something like $20.
However, in a rather short amount of time, I got a letter from the IRS stating that they could not accept a payment for a return more than a couple years old and here was a check for the amount, plus interest.
So I can tell you they not only pay interest on your money, but they pay it on money they are returning even though you actually owed it.
whats the standard for willfully vs a mistake?
That’s from the Wikipedia page about Wesley Snipes. That’s what it takes to get the IRS to really go after you. Not only do you have to do it intentionally, but when you get caught you need to hold the line and say that you refuse to pay.
If you make a “mistake” and claim more deductions than is reasonable or just outright fail it file once or twice nothing really happens. They just try to correct the “mistake.” They try to settle or put you on a payment plan or maybe try to garnish your wages if you don’t respond.
When the IRS goes after tax fraud they are looking for someone trying to claim a multimillion dollar 2nd home in the Hamptons as a business expense, not someone who says they bought more office supplies than they really did. Or when someone with no kids tries to get multiple child tax credits.
When you get audited (by the IRS or anyone, really), they will ask you for a bunch of documents and then come up with their own calculation based on what they believe you owe. You can pay it and be done with it or dispute it. If you dispute it, then it may become contentious. Only then does it even really become an issue.
At the end of the day the “standard” is whatever a judge decides is reasonable, should it even rise to that level. But it almost never makes it that far because someone settles. Generally speaking, the only people who go to prison over tax fraud are those who CAN pay but refuse to.
Because fraud is criminal, in practice the standard is whatever a jury would find willful beyond a reasonable doubt (or, perhaps more to the point, whatever the US Attorney can convince you and your attorney that a jury would be unacceptably likely to see that way.)
From her experience from working both sides. Criminal prosecution happens when people repeatedly challenge the IRS's authority with intent to defraud[1]. Like if they catch you actively[2] illegally hiding income, they fine you. And then find you're right back at it. Otherwise penalties and interest are simply mechanical and based on the amount not squared up for the fiscal year.
[1] You can bitch about the IRS all you want and they don't care as long as your taxes are in order.
[2] Meaning you are doing things to hide assets and income that proves intent to defraud the government. Merely not reporting or failing to record income tends not to count.
Edit: not in line with the guidelines at least
First paragraph
> Be kind. Don't be snarky. Comments should get more thoughtful and substantive,
> Eschew flamebait.
https://news.ycombinator.com/newsguidelines.html
I'd flag, but I don't see the option.
Help me understand.
www.armstrongandgettybingo.com
I'll agree, my interactions with the IRS have gone extremely smoothly when there have been problems.
Unfortunately the same can be said of all sort sorts of fake news stuff: "OK, so it's false, but the idea is important or it happened somewhere else..."