It is no secret that some of you that play winning poker do not report your gaming wins and losses on your tax returns or do not file tax returns at all. The IRS knows it as indicated by an unprecedented press release issued last month by the IRS that proclaimed "Gambling winnings are fully taxable, and within limits, gambling losses are deductible." Not that this is news to those of you that read our articles, nothing has changed except the number of gaming establishments and the number of players. And because of the growth in the gaming industry, the IRS is focusing more and more on the unreported gaming income. If you are in the situation where you have not filed for a number of years and it appears the IRS does not know you exist you may want to consider "coming in from the cold" now before they find you. You will be in a much better situation if you voluntarily file the prior years you have missed to get current rather than to be discovered by the IRS.

How can you be discovered? Many ways, interest on savings accounts is reported to the IRS as well as the proceeds from the sale of stock or real estate. The IRS is not looking to punish the non-filler (there is no debtors prison) but to end the cycle of non-filing. They are aware that once someone slips through the cracks, they will continue to not file year after year, due primarily to fear of what will happen when the get caught or the lack of money to pay the back years' taxes and the penalties and interest that have accrued on these past due amounts. You might be interested to know that the IRS is making deals, forgiving penalties and interest and even are accepting less than payment in full depending upon your circumstances, because they want you to file next year and the years thereafter. They do not want to take your livelihood away, they just want you to start paying your "fair" share. But let us be clear on one point, non-filing is not nearly as serious of an offense as reporting a false name and/or social security number for use on a W2-G. You will not be charged with income tax evasion if you come forward voluntarily but the same cannot be said if they catch up with you.

It is much better to initiate the contact with the IRS than to have them track you down, reconstruct your tax return from any and all data they can find including estimating your income based upon your lifestyle and then filing your returns for you with only their data. The choices for the non-filer are limited, one is to "get legal" and the other is to perpetuate the non-filing syndrome by living an underground existence, possibly in constant fear of being discovered, having to survive in a cash only lifestyle, being unable to take a job for wages or to take advantage of the "system" and its "safety nets" should the bank roll disappear or some other tragedy befalls the non-filer which inhibits their ability to support themselves and in some cases, their family. We also want to reiterate the fact that the IRS fully understands the non-filing syndrome, how it gets started, how it perpetuates itself and literally traps people into lifestyle they would otherwise not have chosen.

Now let us get down to the nitty-gritty and discuss exactly what steps need to be taken to "come in from the cold" . First the non-filer must somehow reconstruct their financial life during the period they did not file. Any records such as bank statements, deposit slips, check registers, diaries, receipts for purchases and services which substantiate legitimate deductions that can be found should be gathered together and organized by category. Next the tax returns need to be prepared for all the delinquent years. If your are going to prepare the returns yourself, be aware that the returns are filed in accordance with laws in effect for the year being filed, so you will need the appropriate forms for the appropriate years and the corresponding IRS instructions to insure that you report your income properly and more importantly, you take all deductions and credits to which you are entitled. If you are unsure of how to fill out the forms or how to interpret the instructions you can seek profession help from a tax attorney, a C.P.A., an Enrolled Agent or any licensed and bonded tax preparer. If you want to avoid the cost of competent assistance, you can take advantage of one of two assistance programs provided through the IRS itself. Your local office provides tax preparation assistance on certain days each week for free performed by actual IRS employees. Additionally the IRS promotes a volunteer program in which lawyers and/or professional tax preparers from your local community make themselves available for free consultations in your area. Contact the IRS (1-800-829-1040) for the specific time and place information regarding these programs at your district IRS office. Once you are ready to file, (you have prepared your returns or are ready for assistance in the preparation) you should contact a non-filer specialist by calling the IRS (see above), default to an operator and request to speak to a specialist in the non filer's section. Discuss your situation with the specialist, including your status as far as preparing your delinquent returns, whether you need assistance or not, and have a good idea of when you will be actually be ready to file. Be ready to discuss the extenuating circumstances that contributed to your becoming a non-filer. Do not be too embarrassed to mention extenuating circumstance such as a protracted divorce, drug or alcohol problems, etc. You will also need to be ready to discuss your current financial situation and your ability to pay. These items may be discussed on the phone or the specialist may want to have you make an appointment for you to explain your case in person. Alternatively, you may initiate contact by merely mailing your returns to the IRS location specified in the instructions for the form 1040 to the attention of the Non-filers Section along with a letter of explanation as to why you have not been filing (remember to keep a copy of your returns and your letter).

Once you have submitted your returns, the next step is triggered by the receipt of a notice of tax due from the IRS Do not ignore this letter, respond right away by submitting payment in full within 30 days or by submitting an Installment Agreement Request or by negotiating a payment plan via telephone with a non-filer specialist at the IRS. An acceptable payment plan is one that covers a reasonable time (normally not more than three years) and that allows you to maintain a reasonable lifestyle while making your payments. It is best to submit your first payment with your request to show your good faith as the IRS is not required to accept an "unreasonable" plan. There is an appeal process in the event they reject your payment plan. In the event your plan is accepted, it is accepted with strings attached. That is you are agreeing not only to making your payments on time but you must file all returns and make all payments on time for the next five years. Failure to do so may cause the IRS to void the agreement and demand payment in full including any penalties even if the penalties were originally waived.

If you are in dire straights and it does not seem reasonable that you will be able to pay the entire amount over the rest of your working lifetime, you may be required under extreme circumstances to liquidate your assets to generate funds with which to make a payment on your liability. If you still have a balance due after such liquidation or possess no assets of any value, you may submit an Offer in Compromise on which you certify you "can't pay" the full amount due which must be supported by an accompanying financial statement form for individuals and offer to pay a lessor amount which you can submit with the forms or you promise to pay by a certain date in full or in installments. You should pay the amount offered in the shortest possible time, which cannot extend beyond two years. If your offer is accepted, as with the installment agreement, you are automatically obligated to stay current for the next five years and if your offer is not accepted you have the right of appeal.

In conclusion, we would urge anyone in this situation to seek professional guidance but if you feel confident completing your own tax returns, all the forms and instructions required are available from the IRS and can be requested by a phone call to the IRS at the number above.