What happens if I do not file a tax return?
You can always file a late return. However, if you are legally obligated to file a tax return and you do not do so, the IRS can take the following steps to determine your tax and make you pay it. First, the IRS will write to you at your last known address to request that the return be filed. This request will be repeated several times. If you do not send in a return, the IRS will send a proposal of the amount of tax, interest, and penalties owed, along with a letter asking for a response within 30 days. The IRS will issue a Statutory Notice of Deficiency and send this to you with a letter informing you of the proposed assessment and all of your appeal rights. If you do not contact the IRS to appeal the proposed assessment, the IRS will send you a Notice and Demand for Payment, billing you for how much the IRS thinks you owe in taxes, interest and penalties and informing you of your appeal rights.
If you fail to file a required sales tax report, the Comptroller’s office will send you an estimated billing, with instructions to file a report providing your actual sales data for the estimated period. Please be aware that failure to file or pay a sales tax report may result in collection actions, including, but not limited to, additional late filing penalties, liens, and criminal charges.
Where, as a result of failure to file the return, the tax evasion exceeds Rs. 1 lakh, the penalty is a fine and imprisonment that could vary in term between 6 months to 7 years. In other cases, it could be a fine and imprisonment of 3 months to 3 years. Over and above this, Sec. 271F imposes a penalty of Rs. 1,000 for late furnishing of returns in normal cases and Rs. 500 for those which fulfill certain criteria. Also, if the income under business, profession, capital gains or house property is a loss, the return must be filed within the prescribed time limit. Otherwise the benefit of carry forward of loss is not admissible.
You will be contacted by the Board and asked to file the required tax return. If you do not file, your seller’s permit may be revoked, which would legally prevent you from operating your business. If at this point you continued to operate your business, the Revenue and Taxation Code, Section 7153, provides that you would be guilty of a misdemeanor, which is punishable by a fine of $1,000 to $5,000 or imprisonment for up to one year, or both.
