I mentioned before that the initial reaction to something going wrong with your taxes is to assume that you are going to jail. I've had countless freaked-out people on my phone who have ended their terrified rants with "...and just don't want to end up in jail over this!" Let me assure you, it takes a lot to get to jail. More than I've seen and I've seen this:
Tax Dodger Case A: She has her own business, but also gets paid by an employer along the same line of that work. She hasn't filed her taxes in six years just because she, "Hasn't had the time to get things together." She dropped off a huge boxes of documents eighteen months ago mostly containing unopened letters from the IRS. I worked on her returns for weeks but couldn't complete them because I needed more information. I called, I wrote, I begged for her to help me help her but I got nothing. Eventually she showed up to collect her box saying she would do it herself. Good luck on that, sister!
Tax Dodger Case B: He also has his own business, with his own employees. While he is terrific now at keeping track of receipts and his employees hours, he wasn't always so put together. He didn't file between 2004 and 2009. We have all of his returns done and ready to go, but we aren't mailing them until he pays us for all of the work it took to get them done. The six years worth of returns have been sitting behind me for a year now. He calls about once a month saying he'll be in with the money. I'm not holding my breath.
Tax Dodger Case C: He shouldn't be here. Five years ago he was given the diagnosis that he would be dead in three months. So he did what anybody would do with that information--he went crazy. A trip to Vegas blew through all of his money double quick and then put him in serious debt. When he didn't die on time, he just assumed it was always just right around the corner so he gave up on paying bills or filing returns. Things went from bad to worse. Just a few weeks ago he came to see me about what we could do to finally fix things up. What prompted this change of heart? He got a letter from the IRS threatening to keep a portion of his disability in order to pay down his tax debt. Now he's all business.
I hope these three stories illustrate how far you can go and still wake up in your own bed every morning. All of these people owe crushingly huge amounts of money to our government, but haven't yet had a personal visit by an agent to their homes to discuss the situation. They've only received letters, lots and lots of letters. So many letters that they don't even bother to open them anymore. I know because I get to open them all. And they scare me to death.