Haven’t Filed All Tax Returns?
Here’s What To Do.
File All Tax Returns
File all returns that are due regardless of whether or not you have the ability to fully pay the amount due with the return. You may qualify for an alternative payment plan, but all alternative payment options require continued compliance with all filing requirements.
Truths About Filing Your Tax Return with the IRS
Failure to file, or a delay in filing a return can be costly - if you owe taxes, a delay in filing may result in penalty and interest charges that could increase your tax bill by 25%, or more.
There is no penalty for failure to file if you are due a refund. But if you wait too long to file, you may risk losing the refund altogether. The deadline for claiming refunds is three years after the return due date.
Individuals who are entitled to the Earned Income Tax Credit must file their return to claim the credit even if they are not otherwise required to file.
Self-employed individuals must file their returns (reporting their self-employment income) within three years of the due date of the return in order to receive Social Security credits toward their retirement.
NOTE: Non-filers that do not respond to the IRS's request for a return may be considered for enforcement actions. Continued non-compliance of flagrant and/or repeat non-filers could result in additional penalties and/or criminal prosecution.
Get Help Filing Late Returns
Businesses, Individuals and joint filers are strongly encouraged to seek professional assistance to meet their tax obligations.
A tax professional can assist taxpayers with obtaining forms, publications and answers to a wide range of tax questions.
What Information Do I Need?
You should bring or mail to your tax professional any information relating to your income and deductions for the years you need to file. If you are unable to find any of the information, we can request that information for you from the IRS. Some of the documents include:
- Forms W-2 - These are the forms you receive each year from your employers showing your wages.
- Forms 1099 - These are forms you receive from banks and other financial institutions showing your interest and dividends. Form 1099s also report self- employment income.
- Information on expenses your want to claim on your return, such as itemized deductions, child care expenses or business expenses.
- Social Security Numbers for your children age one or older and any other person whom you claim as a dependent.
- A copy of the last tax return you filed.
Why Should I File My Tax Return as Soon as Possible?
There are two advantages to filing as soon as possible:
- Generally, if you are due a refund for withholding or estimated taxes paid, you must claim it within 3 years or you may lose your right to it. The same rule applies to your right to claim a tax credit such as the Earned Income Credit (EIC).
- If you are self-employed and do not file a return, you will not receive credits toward Social Security retirement or disability benefits. If you do not file, the IRS cannot report your self-employment income to the Social Security Administration.
Will I Pay Interest and Penalties?
Interest and penalties do not apply to years in which you are entitled to a refund. About a third of those who file returns for past years discover they have a refund coming.
Interest and penalties do apply to years in which you owe money. The interest charged on late payments changes quarterly. During the last several years the interest rate has ranged from a high of 9 percent to a low of 7 percent.
The penalty for filing late is generally not more than 25 percent of the amount owed. The penalty for paying late is 1/2 of 1 percent per month, up to 25 percent of the amount due.
People drop out of the tax system because of personal problems, including serious illness, a death in the family, or loss of financial records in a natural disaster. Tell us why you haven't filed. Depending on your situation, we may be able to get the IRS to waive some of the penalties and interest.
What If I Owe More Than I Can Pay?
Even if you don't have enough money to pay, you should file your return to avoid further penalties for failure to file. We will work with you to find a solution to your problem.
There are alternatives for resolving your account if you cannot pay in full with your return:
- The IRS will work with you to set up an installment payment agreement when the situation warrants. Installment payments allow you to pay your debt over time.
- Perhaps the best way to settle your unpaid tax debt is to file an Offer in Compromise. This is the favorite option among our clients.
What If I Don't File Voluntarily?
It is important to file your taxes. The IRS may take enforcement steps against those who repeatedly choose not to comply with the law. IRS Revenue Agents will prepare returns when taxpayers do not file. The returns which the IRS prepares for you will probably not give you credit for deductions and exemptions that you may be entitled to receive. After it files a tax return for you, the IRS will then send bills to those taxpayers for the tax due, plus interest and penalties.
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?
Many people don't file tax returns because they don't have enough money to pay the tax they owe. They find out on the tax day that their withholding or estimate payments do not equal their tax bill. We can help you avoid this situation by telling you how to ask your employer to withhold enough tax from your pay. If you have income that is not subject to withholding, we can give you the information you need to make quarterly payments to cover the amount you will owe. Changes in your financial circumstances may have an impact on your taxes. For example, if your income goes up, you get divorced, or you sell an asset, you may need to adjust your withholding or estimated payments. If you take these steps, you will be better able to meet your tax obligations and avoid tax day surprises.
Will I Go To Jail?
We have never had a client go to jail. NEVER. None of our clients have ever had the IRS initiate criminal prosecution for failure to file tax returns - because we assisted the client in voluntarily filing. Our clients are strongly encouraged that they have to make an honest effort to file a correct return and have income from legal sources. Any letters which you receive from the IRS concerning your taxes should not be ignored. You need to deal with your tax problem because it will not go away by itself.
The IRS’s goal is to get people back into the tax system, they do not necessarily want to prosecute ordinary people who made a mistake. However, the IRS will continue to investigate flagrant cases involving criminal violations of tax laws.
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