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More than a third of Americans pay no federal income taxes

On Behalf of | Sep 15, 2015 | Income Taxes

Georgia residents may be surprised to learn that no payments were required from the filers of more than a third of all 2012 federal income tax returns. The number of Americans who do not earn enough to pay any federal income tax peaked at over 40 percent in 2009 as the financial crisis pushed the economy into recession, but it has been falling steadily since.

Growing concerns about income inequality have led for calls for income tax rates on the nation’s highest earners to be increased, but data from the IRS reveals that those among the highest 1 percent of income earners already pay 38 percent of all of the income taxes collected each year. The data also shows that the top half of the nation’s income earners account for 97 percent of the income taxes collected.

The financial crisis and subsequent recession also prompted lawmakers to offer assistance in the form of temporary tax relief to those struggling to make ends meet on low incomes. As measures like the American Recovery and Reinvestment Act expired, the number of Americans not required to pay income tax started to decline. However, not all of the taxpayers not required to make any payments were poor. According to IRS data, 40 percent of those who paid no income taxes had adjusted gross incomes of $100,000 or more.

Georgia residents may hesitate before filing an income tax return that calls for no taxes to be paid. The IRS has a reputation for relentlessly pursuing those who underreport their incomes or exaggerate their expenses. However, while the agency can garnish the bank accounts and paychecks of those with unpaid income taxes, they may also be willing to work with taxpayers. An attorney with experience in this area could pursue an agreement with the IRS by making an offer in compromise, and legal counsel could provide assistance to taxpayers facing wage garnishes or asset seizures.