Guide to Laws for Taxpayers in the United States
By law, you have certain rights and obligations with respect to paying your federal taxes and dealing with the IRS.1Internal Revenue Code Note: rights as to paying state taxes vary by state. See our Guide for California taxpayers.
Am I always required to file a tax return?
If you made less than $12,000 in the prior year, you may not need to file.
But if you were self-employed at all last year, or were paid on a 1099 form, you will probably need to file.
Use this IRS Tool to know for sure. BUT even if you don’t need to, you may want to file anyway, as you could get money back! (Talk to a tax professional)
What happens if I don’t pay my taxes or I don’t report all my income?
If you fail to pay your taxes in full, regardless of the reason, you will be charged penalties and interest on the amount you owe. The interest is about 5% per year. The IRS may also seize or force a sale of your assets, including your house, until they recover the amount you owe.
If you intentionally fail to pay your taxes in full, or fail to report your income, you could be charged with a felony for tax evasion, with a fine of up to $100,000 and up to 5 years in prison!2IRC Sec 7201 So, maybe don’t do that.
That said, generally only serious cases of tax evasion are criminally prosecuted. These would involve tax debts of $10,000 or more.
Could I go to jail if I forget to pay my taxes?
Possibly, but it’s unlikely. If you owe a significant amount of taxes (over $10K), and the government believes that you are intentionally evading paying your taxes, they could prosecute you and send you to jail for up to 5 years.
What happens if I can’t get my taxes in on time?
You have an automatic right to file for a 6 month extension. But if you owe the government money, you will be required to pay both late fees AND interest beginning the day after tax day.
Am I allowed to refuse to pay taxes in protest if I don’t like where the money is going or I don’t believe in being taxed?
Nope.3See United States v. Lee, 455 U.S. 252, 260 (1982); Wall v. United States, 756 F.2d 52 (8th Cir. 1985) Making “frivolous tax arguments” could subject you to a penalty of at least $5,000 and up to $25,000.4Internal Revenue Code Sec 6702 and 6673(a) Or you could even be charged with tax evasion (see above).
See more about Laws about Protesting.
Can I challenge a particular tax law that I feel is unconstitutional?
Yes, but you must still pay the tax first! If you win and the law is overturned, you would then get the money back. See more about Legal Basics.
Who can help me with my taxes?
For help preparing and filing your taxes, you can work with anyone who has an IRS Preparer Tax Identification Number (PTIN). This can include accountants/CPAs, Enrolled Agents, or bookkeepers. Some lawyers help prepare tax filings, but most do not choose to do so; tax lawyers generally focus on helping with audits and other tax controversies.
For audits, see below.
What is an “audit”?
An audit is when the IRS asks for documentation and receipts to prove all of the claims, deductions, etc. you make on your tax returns. The government generally audits a certain percentage of taxpayers each year. So even though you don’t need to send this documentation with your tax return, you should keep it in your records in case you get audited.
Can the IRS audit me for past tax years?
Yes, usually up to the last 3 tax years. But if the IRS finds a “substantial error” they can go back 6 years.
What are my rights in dealing with the IRS?
Some of your key rights as a federal taxpayer are:
1. The right to be informed by the IRS about your tax obligations
2. The right to pay no more than the correct amount of tax
3. The right to challenge the IRS’s position and be heard (within IRS administration)
4. The right to appeal an IRS decision in an independent forum (in court)
5. The right to finality
6. The right to privacy & confidentiality
7. The right to retain representation (e.g. an attorney or accountant)
(from IRS Taxpayer Bill of Rights)
Who would I hire to help me with an audit?
If you are being audited by the IRS, you can be represented by either a lawyer, a CPA (certified public accountant), or an Enrolled Agent.
See options for getting legal help on your tax case.
3. Tax Collection
Does tax debt ever expire?
Yes! After 10 years from the date the taxes are assessed, the IRS can no longer collect the taxes. This expiration is known as the Collections Statute Expiration Date (CSED).
The assessed date is generally the day on which you file your tax return. For example, if you filed your tax return for 2009 on April 15, 2010, any tax debt for 2009 would generally be expired as of April 15, 2020. However, there are exceptions, such as if you filed for bankruptcy, which can extend the expiration date.
If you never filed a tax return, the IRS will generally do it for you. The assessed date would be when the IRS files the return, which can be several years after the tax period.
Can the IRS seize my assets if I can’t pay my taxes?
Yes, this is called a levy. The IRS can place a levy on many types of assets, including bank accounts, paychecks (aka wage garnishment), real estate, cars, and more.
Is there any way to stop the IRS from taking my property?
Yes, if you have low to middle income, AND have limited assets. If you are able to prove both of these, you may be able to stop the IRS from seizing your assets and qualify for either a monthly payment plan or an offer-in-compromise. A payment plan is exactly as it sounds: you pay a certain amount to the IRS each month until your debt is paid off. An offer-in-compromise is a type of debt settlement in which the IRS agrees to forgive a portion of your tax debt. The offer-in-compromise is difficult to qualify for, and requires you to have very low income and very minimal assets.
4. Taxes for Businesses and Freelancers
What should I know about taxes for freelancers or small businesses?
5. What is Considered Taxable Income?
If I have a debt that is cancelled or forgiven, are there any tax consequences?
There may be. Cancellation or forgiveness of debt is usually considered taxable “income.” For example, if you have student loans of $100,000, and this is forgiven or cancelled, you may need to pay taxes as if you had received income of $100,000. So, for example, if your tax rate is 20%, you could owe $20,000 in taxes. Check with a tax professional for more!
Are stimulus payments from the government considered taxable income?
No, grants or payments given out for Covid relief or recovery are not taxable, and you do not need to pay taxes on these amounts.
Are unemployment compensation payments considered taxable income?
Generally yes, unemployment benefits and payments, including Covid-related pandemic unemployment assistance, are taxable income.
6. Gift and Estate Taxes
Do I need to pay taxes on money I give as a gift to family or friends?
In 2022 (the amount varies each year), you can give up to $16,000 (or $32,000 for married couples) to an individual without being subject to any taxes or reporting. This applies to any gift of cash or other assets or property, such as a house or car.
If you give someone more than the $16,000/$32,000 threshold, this doesn’t necessarily mean you must pay tax on it, but you do need to file IRS Form 709 to disclose the gift. At what point do you need to start paying taxes on gifts? When you hit your lifetime gift total of about $12 million (same as the estate tax amount). Then you would pay tax on any gifts above that amount.
See more at IRS.gov.
Do I need to pay taxes on money I receive as a gift from family or friends?
No, as a recipient of a gift or donation, you do NOT pay any tax on it! Only the giver or donor pays it, if applicable.
What is the estate tax or “death tax”?
The estate tax, sometimes referred to as the death tax, is a tax that must be paid when a person dies and leaves more than $12 million (as of 2022) to their heirs. The tax only applies to the amount above this threshold, so the first $12 million is tax-free.
Find options for getting help with taxes and tax issues.