Non-Filed Returns, Late Tax Returns

Non-Filed Tax Returns

If you have not filed your federal income tax returns when due, it is important that you know of the ways to resolve this situation. You must find out about solutions and take action before your situation becomes a problem.

If you skipped filing a year or missed several years and now you fear re-entering the tax system, it is important that you understand that if you file overdue returns on your own you will probably receive much better treatment from the government than if you get caught for not filing.

For taxpayers who can't pay their entire tax bill at once, there's an installment payment option.

Some non-filers are actually entitled to refunds. There is a statute of limitations for claiming a refund which is 3 years from the due date of a return not counting any extensions. For example, to claim a refund for the year 2000, the refund claim must be filed 3 years from April 15, 2001 so the deadline is April 15, 2004. Thus, a return filed more than three years late will be fruitless as a refund claim. However, even if you can't get your refund, filing the return will get you "compliant" for that year, an important step to help you get back into the good graces of the IRS.

I help non-filers to file to file back tax returns and get back into the system without sending up red flags to the IRS.

Willful failure to file tax returns can result in a punishment of up to five years in jail and $100,000 fine, so this is a serious matter.

You may have many questions you need immediate help with such as:

What should you do if your records are lost or for some reason you do not have the records you need to prepare your tax return?
Should you file a joint return, or would it be better for you and your spouse to file separately?
How can you replace your W-2 or 1099 tax forms?

Call me if you need help with these questions.
Also, I can help you with other questions such as:

How much will you owe in tax, penalties and interest?
How can you pay this debt? What are your payment options?
Should you submit an offer in compromise?
Should you file for bankruptcy?
How will this affect an innocent spouse?
Should you set up an installment plan?

Late Returns - Frequently Asked Questions:

Why Should I File My Tax Return as Soon as Possible?
What If I Owe More Than I Can Pay?
What If I Don't File Voluntarily?
How Can I Avoid Owing Money on Next Year's Return?
Will I Go to Jail?

Why Should I File My Tax Return as Soon as Possible?

There are two advantages to filing as soon as possible:

Generally, if a taxpayer is due a refund for withholding or estimated taxes paid, it must be claimed within 3 years of the return due date or risk losing the right to it. The same rule applies to a right to claim a tax credit such as the Earned Income Credit (EIC).
Self-employed persons who do not file a return will not receive credits toward Social Security retirement or disability benefits. Failure to file results in not reporting any self-employment income to the Social Security Administration.

What If I Owe More Than I Can Pay?

Even if a taxpayer doesn't have enough money to pay, returns should be filed to avoid further penalties for failure to file.

The IRS has streamlined its policies to offer alternative account resolutions if a taxpayer cannot pay in full with the return:

The IRS will help to set up an installment agreement when the situation warrants. Installment payments allow taxpayers to pay the tax debt over time.
The IRS will consider whether an offer in compromise is an appropriate solution.

What If I Don't File Voluntarily?

The IRS is taking enforcement steps for those who repeatedly choose not to comply with the law. IRS employees will prepare returns when taxpayers do not file. The returns prepared by the IRS might not give credit for deductions and exemptions a taxpayer may be entitled to receive. Bills will be sent to those taxpayers for the tax due, plus penalties and interest.

People who repeatedly don't comply with the law are subject to additional enforcement measures..

How Can I Avoid Owing Money on Next Year's Return?

You may not have filed your tax returns because you don't have enough money to pay the tax you owe. You found out after completing your return that your withholding or Estimated Tax payments do not equal your tax liability.

To help avoid this situation, you can ask your employer to withhold enough tax from your pay. For any income that is not subject to withholding, you must make quarterly payments to cover any amount to be owed.

Changes in financial circumstances could have an impact on taxes. For example, an increase in income, divorce, or selling an asset, may require adjustments to your withholding or estimated payments.

By taking these steps, you will be better able to meet your tax obligations and avoid unhappy surprises.

Will I Go to Jail?

A long-standing practice of the IRS has been not to recommend criminal prosecution of individuals for failure to file tax returns, provided they voluntarily file, or make arrangements to file, before being notified they are under criminal investigation. The taxpayer must make an honest effort to file a correct return and have income from legal sources. A letter from the IRS concerning taxes is not a notice that a taxpayer is under criminal investigation.

The IRS helps to get people back into the system as part of its long-term plan to improve voluntary tax compliance. The IRS wants to get people back into the system, not prosecute ordinary people who made a mistake. However, flagrant cases involving criminal violations of tax laws will continue to be investigated.

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Ralph Sayers, CPA
P.O. Box 271
Terra Ceia, FL 34250

Call: 941-723-9106
Fax: 941-723-1102
E-mail: ralphs@tampabay.rr.com