|
Non-Filed Tax Returns
If
you have not filed your federal income tax returns when due, it
is important that you know there are ways to resolve this
situation. You should find out about solutions and take action
before your situation becomes a more serious 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 is
an installment payment option.
Some
non-filers are actually entitled to refunds. There is a Statute
of Limitations for claiming a refund which is three years from
the due date of a return not counting any extensions. For
example, to claim a refund for the year 2006, the refund claim
must be filed three years from April 15, 2007 so the deadline is
April 15, 2010. 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 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 that need immediate answers 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?
·
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?
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 three 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 didn't have enough money to pay the tax
you owed. 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
more 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.
Call
me if you need help with any of these questions.
Ralph
Sayers, CPA
(877)
316-4331
ralphs@tampabay.rr.com |
