You Have Unfiled Tax Returns – Now What?
Unfiled returns happen for a variety of reasons. First, understand that you are not alone. Maybe you own a business and you’ve concentrated on building a product or providing services, but you haven’t taken the time to do your books each year, much less file your returns. Maybe you have had a horrible few years with personal issues and filing your returns has been the last thing you can do. Maybe you just simply forgot to file or know you don’t have the funds to pay a balance owed. No matter what the reason or how many years have gone unfiled, this problem can be resolved relatively easily.
You should make every attempt to comply with the filing requirement, especially if you have been receiving notices from the IRS. There are several reasons that filing is so important. First, if you owe taxes, the IRS will impose a failure to file penalty, along with interest on the taxes you have not paid. The longer you wait to file, the more your penalty will be.
What Happen When You Don’t File Your Taxes
If you have a professional license, it could be revoked until you file your returns and pay the tax owed. This could affect your ability to earn income and pay your taxes.
In addition, you will not receive a tax refund that may be due to you. The only way to receive your refund is to file a return within three years of the original filing date. After that, the IRS is not required to pay you your refund. Also, the IRS can hold your refunds in subsequent years if it sees that you haven’t filed a return for a previous year.
Sometimes the IRS will file a return for you. The problem with this is that the IRS makes many assumptions as to what your income and deductions are that have nothing to do with your current situation. For example, if you own a business, the IRS may just take your prior year income and apply it to the unfiled return year and calculate your taxes without any business deductions. You will get a tax bill for the whole amount. If you had filed your own return, the amount due would be much less because it would be based on actual numbers.
Furthermore, your retirement benefits could be affected. If you don’t report your social security wages on your tax return, the Social Security Administration will not have the information it needs to be able to properly calculate the amount available to you to pay at retirement or disability.
It could also affect your ability to get lending or apply for government benefits. Often times banks or agencies require copies of your prior tax return filings. If you have nothing to show, you may not get the lending or funding.
What to Do About Unfiled Tax Returns
If you owe taxes for other years, the IRS will not consider you for an installment arrangement or for an Offer in Compromise. [Click here to read about options for tax debt forgiveness with the IRS]. If you did get an Offer in Compromise accepted, you must stay tax compliant for at least five years. That means that if you fail to file a tax return (or pay the tax) in any year following the acceptance, all of the tax that you compromised will come back on you. You will be back at the drawing board for settling your tax issue.
The time limit for the IRS to audit you and collect outstanding taxes does not begin to run until you file your return.? Generally, the IRS has three years to audit your returns and 10 years to collect the taxes. If you do not file, the clock never starts.
These are just a few reasons why it’s important to file. If you need help collecting the information to file your returns, the IRS has some of that information and Revermann Law can help you get that. Most importantly, getting those filings in will help settle a lot of the other tax issues you may be having. A tax debt professional can help get you tax compliant and start with a clean slate. Contact Revermann Law today.