What Happens If You Have Unfiled Tax Returns?
If you find yourself in a situation in which you have a few (or many) years of unfiled tax returns, you may be worried that one day the IRS is going to catch up with you. And, in all honesty, you would be right. The IRS is always keeping track of what you need to pay them.
If you owe the IRS money and have not filed returns, then the IRS will eventually make contact with you. It might not be right away—in fact, it could take months or even years for the IRS to reach out to you. The best possible thing that you can do if you have unfiled returns is to get ahead of your situation and make a plan to file your return(s) ASAP.
When You Owe Taxes
Every United States resident or citizen who owes taxes — usually by achieving a certain income level threshold– must file them by April 15th of each calendar year. You can get an extension, but you have to file for that as well. Certain freelancers have to pay quarterly income taxes as well to the federal government. Other state taxes also account for income, like New York as one example.
The government already knows how much you owe in taxes, and when you have missed a return. They keep track of your finances and income. Thus, if you claim hardship but own a luxury vehicle and home, the IRS may keep a close eye on you. The same goes for if you fail to file your tax return or request an extension. They will add up the numbers and ask why you didn’t pay up or honor your debt.
What Happens When You Fail To File Your Tax Return
For one, you risk losing your tax refund if you qualify for one. A good number of taxpayers rely on the refund to assist with their annual expenses. Even a minute delay can cause worry, and you may not receive it at all.
The IRS starts issuing penalties and fines. They will be added to your debt on April 16 of the year that you miss payments. Usually, the first penalty is five percent of what you owe for that fiscal year. The more payments you miss, the fines increase.
Jail time is the most extreme case of what happens when you ignore your taxes. The most famous case would be the gangster Al Capone, who was imprisoned in Alcatraz during the 1930s.
With that said, the IRS will not arrest you immediately for missing the federal tax deadline. They will reach out to you and try to find an alternative. We thus recommend that you take the following steps.
Do Not Panic For Your Taxes
Excess worry will not help your situation, and may just make it more difficult. Try to relax and realize that you are not the only one that has faced the task of resolving unfiled tax returns.
People have been paying these taxes for years, and there are designs in the system to help you resolve any debt. You aren’t like the people who are evading taxes on purpose by burying their income data.
Panicking also means you are more likely to fall for IRS scams. These scammers call and claim they’ll call the police on you for missing taxes. Knowing that the IRS only makes phone calls as a last resort will help you from transferring payments in a rush.
You are in much better shape if you approach the IRS, rather than waiting for the IRS to notice and approach you. Keep track of the correspondence you receive and any tax information, especially any options. Then you can find the right solution. A clear head and a positive attitude will go a long way toward solving your tax issues.
Contact the IRS
While the IRS may have an intimidating reputation, their representatives can actually be quite helpful. They want to help if you are making contact with them to proactively solve a problem. The IRS will be able to provide you with some time to file these returns and may be able to give you a sense of how much you will expect to see in penalties and interest.
Consider Professional Support
If you decide that you need help gathering your tax documents, reviewing your old and unfiled returns or making contact with the IRS, you may want to consider getting the help of a tax professional. A reputable tax firm will have extensive experience with unfiled returns and can give you advice about the best way to proceed in your individual case. In addition, a tax professional will know exactly the right questions to ask the IRS representatives that may actually help your situation.
Take It One Step at a Time
If you find that you owe a fairly large sum of money to the IRS, keep in mind that there are often payment options that may allow you to pay the amount over time (installment agreement) or in some cases, settle your debt for less than the full amount that you owe (offer in compromise). A tax professional can also provide guidance on your payment options. That way you and the IRS can reach an agreement while reducing the potential debt.
If you are facing a stack of unfiled tax returns, act now. If you continue to ignore the situation, you will only find yourself owing more money to the IRS. They will then charge interest and penalties as discussed above. In addition to the potential risk of jail time, the debt will wreck your credit. Deciding to partner with a tax firm may be a smart move for you and your family.
Success Tax Relief Can Help!
Success Tax Relief has more than 30 years of experience working closely with taxpayers and the IRS to find solutions that are workable. In addition to assisting with tax debt, we will also work closely to help optimize your returns and get the best value out of your business or personal finances.
Contact us today and learn how we can help you! We’ll help you file a complete tax return and assist with your financial problems. You won’t have to fear the IRS with Success Tax Relief’s help.