Randolph Law Firm, P.C.

Nonfiling and extensions, part 1: the IRS's nonfiler program

Not everyone is required to file an individual tax return. The requirement to do so applies only to those whose income exceeds certain thresholds.

But if you are required to file, and don't, the IRS does have ways to determine that you should have filed. The same is true if you filed an automatic six-month extension.

In this two-part post, we will use a Q & A format to discuss how the IRS nonfiler program applies to such a situation.

Are extensions common?

Yes. Filing for an automatic six-month extension is very common. People do it for all sorts of reasons and there is no need to give any justification for it. All you have to do is file Form 4668.

In 2015, nearly 13 million people filed six-month extensions, pushing the filing date from mid-April to mid-October.

What happens when the six-month period ends?

Though many taxpayers do file at that time, others do not. Each year, the IRS sends out delinquency notices to more than 640,000 nonfilers whose extensions have expired.

The IRS uses an automated program to do this. The program is called - in full bureaucratic language - the Case Creation Nonfiler Identification Process.

How does the IRS know who didn't file?

The IRS uses third-party reporting information. IRS computers can match up income from forms sent in by employers, banks and other sources of income. This includes W-2s and all the different types of 1099s.

IRS computers can also compare lists of taxpayers who filed in the past and compare those names to those who filed in later years.

How is the nonfiler program supposed to work?

The program is supposed to work by automatically sending out delinquency notices to nonfilers identified by the program. In part two of this post, we will inform you about how it has worked in practice.

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