What happens if I don't pay my taxes?
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California will eventually catch up with you (it took 7 years for me) and take the money directly out of your checking account. They will send you letters telling you that they are going to take the money out of your bank before they do it.
The federal IRS will just keep sending you letters. It's worth paying up ASAP because the interest is substantial. I ended up paying about $800 in interest.
None of these things ended up on my credit report, which was a relief but I thought was a bit weird.
I've also heard that your passport won't be renewed if you owe the government money. However, I'm not convinced the IRS and the state department are well coordinated. I'm assuming it's more about preventing huge tax evaders from fleeing the country.
They see $6mm in sales, treat it all as capital gains, compute the tax I owed on it (and obviously hadn't remitted), stacked up huge penalties and failure to timely file fees, etc.
When I finally got around to filing the correct information (you have 3 years from the original due date of the return to file to claim a refund), they took the updated schedule D information, and cleared the account.
In the 18+ months that they were sending me notices for over a million bucks, they never took any further action. So, I don't think it's a dollar threshold, but rather a time threshold at which point they start attaching wages, subjecting you to backup withholding, etc.
Also, the stress totally isn't worth it.
Why can't I just check an 'opt-in' box somewhere and have this as the default? It just seems inane that every year I have to go through this ritual of copying numbers from one form to another form when the gov't already gets its own copies. I mean, why can't this be automated where you get an intial version from the gov't and if you want to file an amendment to correct or include other items then you can but if you just accept the default you can do that too? Too efficient maybe?
But I think it has downside. Those who do not touch their own tax calculation don't tend to think about taxes; most of my acquaintances when I was in Japan had very vague idea of how much they paid for tax. After moving to US I noticed that people are much more aware of tax they're paying, hence how the government spends them.
I now even think Japan should make everyone file, like US.
Most people have already paid their taxes and just have to file some paperwork confirming it. Many people have overpaid and if they don't fill out that paperwork, the government gets extra money. The IRS isn't going to care much then.
If you owe a small amount of money (probably the most likely case) they are going to care, but it's just not worth their while to deal too much with it. By small amount of money, I mean like $100. At that point, they'll want you to pay it, but it might cost them more to get you to pay it than the $100. Having a staffer spend 3 hours dealing with you would probably wipe out that $100. So, they'll take measures to make you pay, but they aren't going to waste too much effort.
If you're underpaying your taxes by a good deal, they'll make your life hell if you decide to brush them off.
The IRS operates similarly to how you'd expect - some things are worth their time, others aren't. Yeah, there are always humorous stories about someone getting a bill for less than a dollar, but overall the IRS wants to spend its time chasing the money. That means going after the egregious violators who are rich because those are easy to spot and have the most benefit to them. Going after someone earning $50k who forgot to report $30 worth of interest income on one of their bank accounts just isn't worth it.
So, in theory, you could have 100 bank accounts each with $9.99 interest and not pay any taxes.
But then again, maybe having 100 bank accounts would automatically trigger an audit.
Don't you have to mention your Social Security number every time you open a bank account? Yes, I think having 100 different bank accounts would get attention from some government agency, perhaps the Department of Treasury office that tracks money-laundering.
Short lesson is, never, never, never dick with the tax man if you're a British tax payer.
I'd be surprised if NY was that lenient.
CA isn't. I know of cases where they went after folks who had no CA property and hadn't been in the state for months before receiving income that CA wanted to tax.
CA says that you're a resident after a small number of days for the purposes of car registration. I'd be surprised if they were more lenient when income was involved.
CA wants income taxes from folks who win money in golf tournaments or play professional sports a couple of times a year in CA.
Residency is tricky. There's an infamous case where >100% of an estate was owed in taxes because several states managed to claim that the deceased was a resident of their state for the purposes of taxation.
Renting doesn't involve filing paperwork with the state, at least not in the US. (FWIW, ownership does not establish residency - you can own property in a state where you're not a resident.)
My point is that states often think that you're a resident even if you haven't filed any paperwork with them. Yes, there are cases (such as driving or bringing a car into the state) where they penalize you for not filing paperwork, but in others, they just tax you.
However if you get a driver's license or register your car there, then you may start getting snagged. If that happens you will be deep in see-a-CPA territory, since you'll need to prove that your primary residence really isn't in NY, and that you paid taxes on all of your income in another state, didn't earn any of it while working there, etc.
If you put down your New York address on any payroll forms though, it's pretty much all over. I have heard anecdotally they are extremely aggressive (and also don't have the rules against double-taxation) compared to other states.
* I pay TAXES.
* With them I buy CIVILIZATION.