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Back tax returns, at a glance:
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In an effort to boost tax compliance and more effectively enforce the law, the Internal Revenue Service has announced that it will contact more taxpayers who have not filed tax returns for previous years. In their collection efforts to reach individuals who haven’t filed federal tax returns, the IRS is using compliance techniques like in-person visits. The goal is to increase compliance in people who unfiled tax returns.
When the IRS receives information from employers and other organizations showing that someone has a tax liability for that year, they will send a notice to the individual of the possible tax liability for that year. For those who have a tax refund coming but have not filed a return for at least one year within a 5-year period of the refund, the IRS will not disburse the refund until the taxpayer is up-to date with filing their returns.
The IRS has said that they are holding many refunds that are due to non-filers, and they encourage those taxpayers to file their past due returns.
For a variety of reasons, taxpayers may fail to complete their tax returns for one or more years. When they do try to file all their late returns, they can become completely overwhelmed with the task. Some reasons people fall behind in doing their taxes is not having some or all of their records, not having the funds to pay their tax, or just negligence. Thankfully, there are solutions to the issue of unfiled tax returns.
There are several issues regarding late tax filings or an unpaid tax debt. First, it is very stressful to deal with unknown outcomes and the accompanying potential financial burdens. Second, most people do not have the knowledge to represent themselves in these situations resulting in additional stress and unfavorable results. And finally, there are so many companies that offer Tax Resolution Services that it is difficult to choose a firm that you can trust.
Problems with the IRS will not just go away. If you owe back taxes to the government, they will incur interest and penalties that continue to build and snowball. It may seem like the IRS isn’t doing anything, but at some point, they will come after you and they do not give up. They can garnish your income and put a lien on everything you own. It is one of the most stressful things an individual or business will have to deal with, so don’t try to do it on your own.
Let’s be honest, some situations are difficult to resolve. If a tax return was prepared with significant errors there is no quick fix. In this situation the next step is either negotiate a reduced settlement if applicable or make affordable payment arrangements. We offer a thorough evaluation of your specific situation and outline the steps that we will take as your representative.
What if you are two, three or more years behind in filing personal or business tax returns? As tax professionals we have the experience to assist you in gathering the financial records to prepare these returns and meet all the filing requirements. We believe that it’s important to keep you in compliance with tax laws while paying the least amount of taxes legally possible. We will help you uncover whatever tax deductions you are legally allowed to take. We will help you get it done, get those past years filed and become current in all years going forward. This burden will be eliminated forever!
Taxpayers who want to take care of unfiled returns themselves can access tax forms for current and past years along with supporting instructions on the IRS.gov website, on the Forms and Publications page. The IRS can also be reached by phone at 800-829-3676 (800-TAX-FORM).
You should start by being sure you have all the necessary documentation and forms. If missing any, start by asking for a copy from employers, etc. If it’s not possible to get missing forms, a free wage and income transcript can be requested at IRS.gov on the Get Transcript Online page. Or, Form 4506-T can be filed to request a transcript. The IRS will then send information and forms they have accumulated, which can be used by the taxpayer to file their returns.
You should always file your taxes on time. Whether or whether you have the funds to pay, getting your return filed by the due date will help you avoid fines and interest. The penalty for failing to file is significant; it often costs ten times as much as the penalty for not paying the tax bill.
Each month or partial month that your tax return is late incurs a penalty equal to 5% of the unpaid taxes. This penalty accrues but never goes above the maximum of 25% of the entire amount of taxes owed. In contrast, the fine for tax payments beyond the deadline is only 0.5% for every month they are not paid. The minimum penalty for filing late is $135 or 100% of the unpaid tax, whichever is smaller.
The IRS usually only goes back as far as 6 years to enforce unfiled returns. Usually, any actions taken for enforcement of late returns are typically finished three years from the return’s due date.
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This is not just about resolving current issues, it’s about developing a long-term business relationship.
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