Taxpayers Shouldn't Make A Frivolous Return Filing Situation Worse

Posted on: 27 July 2016


Taxpayers who choose to file frivolous income tax returns often do so without realizing the severity of their actions. Those who receive a frivolous tax return letter in the mail should speak with a tax professional to straighten out the matter to avoid a disastrous situation from playing out.

The Warning Letter

Anyone who files a frivolous tax return, a return that contains blatantly false assertions or egregious omissions designed to prevent the collection of taxes may receive a letter in the mail stating the return is being rejected and a proper return must be filed instead. Failure to do so in 30 days may result in a $5,000 fine. At this point, the IRS is giving the frivolous filer a way out. Making the right decisions at this point is critical since the IRS will initiate action to address the improper return and collect taxes duly owed.

Do Not Double Down on a False or Frivolous Claim

If the IRS has sent out a 30-day warning letter and is very obviously in the right, do not insist the claim is correct. Being levied the $5,000 fine becomes unavoidable and this may be the least of the troubles. There could even be criminal fraud charges associated with the inaccurate and perjurious information presented on the documents. Taxpayers do have a legal obligation to be accurate when filing a return.

In a well-publicized case, a Georgia taxpayer once filed a return that made unsubstantiated claims regarding bond payments and interest withheld. The IRS initially chose to treat the situation as a frivolous return filing. The taxpayer did not correct the return and the IRS and the Justice Department responded with a criminal fraud charge.

Work with a Tax Professional

A skilled tax professional can file a correct return within the 30-day window. In some cases, the IRS could be mistaken with the assertion the return being frivolous. A tax accountant or attorney would know the proper way to contest the IRS' claims. The key point here is a skilled professional knows how to go about challenging the claim without creating more troubles for a client.

Additionally, a professional is not going to follow an approach that is doomed to failure and lead to a devastating outcome. A tax professional also knows when it is unwise to challenge the tax authorities. Ultimately, an honest tax accountant will help a client resolve troubles with the IRS by properly complying with all laws.