Late Fee for Late (2010) Return?

[MsTabbyKats]

Client is a dual US-British citizen, and has lived over there since 2008. That year and 2009 were filed timely. Her income is well below "the exclusion".. So, no tax due.

Now she just woke up and wants to file 2010. But...is there any late filing fee for this?

Note...she only contacted me because her friend got an $800 refund and she wants hers also. When I told her she wouldn't be getting any money, she said she didn't want to file....and I told her that she was supposed to, and there could be consequences in the future.

If there is any chance of some late fee...I'd rather pass on this one.

[ILLMAS]

You should advise them to go ahead and file and to be prepared to pay any late fee or penalties for not filing on time.

[JohnH]

Late filing penalties are based on the tax due, so if there's no tax due then there is no penalty.

If her income is clearly below the filing threshold then she has nothing to worry about.

However, if there are any ambiguities and there is any chance that she might owe tax in any significant, then the SOL has never started and it never will until she files.

Any chance she needed to file a FBAR?

[MsTabbyKats]

Late filing penalties are based on the tax due, so if there's no tax due then there is no penalty.

If her income is clearly below the filing threshold then she has nothing to worry about.

However, if there are any ambiguities and there is any chance that she might owe tax in any significant, then the SOL has never started and it never will until she files.

Any chance she needed to file a FBAR?

No chance of FBAR....she has $50 in the bank. I'm sure she doesn't owe income tax. Her income was wages of $35,000. I'm just concerned that there's some kind of late fee for people living abroad. I can't find any references...but maybe someone knows something I'm unaware of.

[mcb39]

I, also, have a client who came in a couple of weeks ago and hadn't filed since 09. Of course, in this case, the IRS is already involved and I am reporting directly to them. Just finished 10 and he has no liability so I was wondering the same thing; not that it matters personally. I am sure that moving forward that will not be the case. When I told the revenue officer today, he said "Good, have him sign it and send it to me."

[kcjenkins]

Every year or so, someone in Congress suggests a penalty even if no tax owed, but so far they have not done it. Some states, like CA, do it now. They call it a Demand to File Penalty.

[Max W]

2010 is a closed year. Would have had to filed before Apr 15 of this year to receive a refund.

kc - " They call it a Demand to File Penalty."

The CA Demand Penalty comes only after several notices have been sent out and after Filing Enforcement has been imposed (FE).

It is similar to the IRS SFR, but some of it is based on guesswork rather than strictly on income reported. For example, if one has paid mortgage interest, then the FTB calculates the income to be 4 times the interest. If someone has a CA Consumer License, which covers barbers, doctors, sales persons, contractors, etc, etc. Then they take the average income for that category and compute the tax based on it.

The demand penalty (25% of the tax) is not applied until various notices have been sent out. However, once applied, it cannot be removed -Even if a subsequently prepared return shows no tax due.

[Jack from Ohio]

I thought the idea of no late penalty if you are getting a refund was decided by the tax courts long ago. Am I mis-informed? The idea being that if a refund is due, all taxes have been paid. Hence, no late filing or payment penalties.

[kcjenkins]

I thought the idea of no late penalty if you are getting a refund was decided by the tax courts long ago. Am I mis-informed? The idea being that if a refund is due, all taxes have been paid. Hence, no late filing or payment penalties.

That is true now. HOWEVER, if Congress changed the code, then there could be a penalty simply for 'not filing'. Not now, because the code is written based on the logic off your 3rd sentence. But it could change if Congress changed the code, and some want to change it just to get more revenue. The tax courts rule based on what the code says at the time.