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What in the world is a W-2? Is it illegal not to file a tax return? Aren’t I supposed to get money back? Why is the IRS trying to contact me?  — The world of taxes and tax returns is a scary and confusing one. The people that professionally prepare taxes take 5-10 weeks worth of classes just to earn a certificate on taxes. Here’s the low down on some tax basics:


What is a W-2?

In basic terms, a W-2 is a form that lists how much money you made from your place of employment for the tax year. (In 2017, you will be filing your 2016 tax return). It shows how much you claimed in tips (if any), and how much you paid in state and federal taxes. It is important to note, that in most cases, the amount you paid will NOT be the amount you receive back from a tax return.

Your employer must legally provide you with a W-2 by the end of January. If you have multiple employers, you will receive a separate W-2 for each of them. If you have not received your W-2s or if there is an error on them, contact your employer immediately.


Should I pay to get my taxes done or do them myself?

If you have never done taxes before, or are not quite sure what you are doing, it’s always best to go to a tax preparer. In most cases, they will charge a small fee to do your taxes correctly and thoroughly, and also provide support if the IRS does investigate your tax return.

If you are leaning towards doing them yourself, there are many online options that allow you to begin doing your return for free. In the process, it will let you know, if you are willing to pay an additional fee, you’d be able to get a larger return back. You can typically have the additional fees subtracted from your total refund amount, preventing you from paying fees upfront.

One positive thing about doing your taxes on your own, online, is the ability to do them at your own pace. It typically takes me a couple days to track down all the documents and information I need, and it is easy to pause the tax return process and come back at a later time once I have everything in front of me.


Is it illegal to not file taxes?

Filing your taxes is mandated by the federal tax code for most adults who earn income. State tax codes have similar provisions. Certain individuals, such as children who don’t earn money and can be claimed as dependents, and adults with extremely low annual incomes, are exempt from filing taxes. For them, filing is optional, although it’s still a good idea. For all other individuals, failing to file taxes for any reason is a violation of the tax code. (http://finance.zacks.com/illegal-not-file-taxes-1669.html)

Choosing not to file can lead to serious fines, penalties, and criminal charges.

Help! Why do I owe taxes this year instead of getting a refund and what if I can’t pay them?

Do you remember having to fill out a W-4 at the beginning of the year? The one where you have to specify how many dependents you have? If you wrote anything but 0, your employer decreased the amount of taxes they took out of your paycheck weekly, causing you to owe more in taxes annually.

Other things that might change your taxable income are earning a higher salary, marriage/joint-filing, losing a dependent when they are old enough to be independent, or earning a tax cut in previous years for an event in your life that you no longer qualify for.

In regards to not being able to pay your taxes, I referenced legalzoom:

Your best bet is to always pay as much as you can to reduce the amount of interest and penalties you’ll owe. Then, immediately call, write or visit the nearest IRS office to explain your situation. Based on your situation, the IRS may offer one of the following resolutions to paying your bill:

Installment Agreement

You may be able to make monthly payments through an installment agreement. This allows your full payment to be paid in smaller, more manageable amounts.

Temporary Delay

The IRS may give you the option of temporarily delaying the collection of your bill if the IRS determines you cannot pay any of your tax debt. During this period, the IRS continues to review your ability to pay and the IRS may also file a Notice of Federal Tax Lien to protect the government’s interest in your assets.

Offer in Compromise

If you qualify for an Offer in Compromise, the IRS will settle your unpaid tax accounts for less than the full amount of the balance due. This applies to all taxes, interest and penalties. Please note that a $150 application fee is charged when filing Form 656, Offer in Compromise. An Offer in Compromise is only considered after all other collection alternatives have been explored.

What if you receive a bill that you believe to be incorrect? You should immediately write or call the IRS office that sent you the bill, or visit your local IRS office. Make sure to have a copy of your bill handy, along with any records, tax returns, canceled checks, etc., that will help the IRS understand why you believe your bill is wrong. (https://www.legalzoom.com/articles/what-are-the-penalties-for-not-filing-taxes)


I filed my taxes, but haven’t received my return and the IRS is contacting me. Why?

Firstly, the IRS will never personally contact you. If “Dave from the IRS” is leaving harassing voicemails on your phone, call authorities – this is a scam to get your credit information. The IRS will use local tax and bill collectors to contact you in regards to your tax returns.

Typically, if you have filed your taxes and the IRS contacts you, it’s because there is an error or discrepancy on your tax return, hindering the refund process. It could be something as simple as putting the decimal in the wrong place for a financial amount. This is a great example of why using a professional tax preparer might not be a bad idea.

It is an uncomfortable topic, but some people do lie on tax returns. In fact, in 2016, the government lost $250 billion to tax fraud. The penalties for lying on a tax return and getting caught are as expected – fines, jail time, further penalties. If you think you may have made a mistake on your return (unknowingly) – you will probably be fine.

The IRS reported auditing 1.2% of all tax returns in 2015, and the law states, in order to be found guilty of filing a fraudulent tax return the IRS must prove that you: “Willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter.” (Title 26 USC § 7206(1)). In other words, you must intentionally and knowingly lie on your taxes or other tax related documents. This includes actions such as recurrently leaving certain income off of your tax statements or changing your income forms to reflect false information. (http://law.freeadvice.com/tax_law/tax_enforcement/filing-fraudulent-income-tax-return-crime.htm#ixzz4ZcaBF700 )


Need some more advice about taxes, reach out to Tammy Lally, the Money Coach!


Tammy Lally

I BELIEVE MONEY IS NOT YOUR WORTH. Tammy Lally is an author, speaker, and Certified Money Coach (CMC). She helps others master their finances by first conquering their emotions around money, then by creating a comprehensive financial plan. She brings decades of experience and endless love to her bulletproof process for money mastery. She is the author of the book Money Detox, and her TED talk on Money Shame has over 2 million views.


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