Updated June 7, 2021 If you have n’t been filing your federal income tax returns, it ‘s a good thing you ’ re here ! If you have n’t been filing your tax returns for years, you could avoid a lot of trouble oneself with the IRS by filing these old returns. This article will discuss why you should file your unfiled tax returns along with tips for the best way to file these honest-to-god returns.
1. You Need To File Your Tax Returns To Avoid Civil Penalties And Criminal Prosecution
Are you required to file a tax return ? As a general rule, you are n’t required to file a tax return if your income is less than your standard deduction. however, there are many exceptions to this predominate, such as when you have self-employment income. The easiest way to determine whether you need to file a tax return is to use the IRS Interactive Tax Assistant. After completing the questionnaire, it will let you know if you ‘re required by the tax police to file a tax return. If you ‘re required to file a tax retort and you do n’t file, you will have committed a crime. The criminal penalties include up to one year in prison for each year you failed to file and fines improving to $ 25,000 for each year that you fail to file. Lucky for you, the IRS rarely uses criminal pursuance against taxpayers. The IRS does n’t have the resources to criminally prosecute every non-filer. indeed, when it uses the condemnable laws against a taxpayer, they make certain it ‘s for a high-profile cause or there ‘s a large tax debt involved. In this way, the prosecution gets maximum coverage. other taxpayers see these prosecutions unfold and it motivates them to file their taxes to avoid going to jail. While the IRS rarely uses condemnable pursuance to enforce taxpayer obligations, it constantly uses civil penalties. If you fail to file your taxes, you ‘ll be assessed a failure to file penalty. This penalty is 5 % per month for each month you have n’t filed up to a maximal of 25 % over 5 months. If you failed to pay, you ’ ll besides have 1/2 of 1 % “ failure to pay penalty ” per month assessed against you. This penalty could besides rise to 25 % over 50 months. Interest accrues on your unpaid taxes, penalties, and the pastime is assessed on the accrued interest itself. There ‘s no legislative act of limitations on a tax audit for a tax year if you do n’t file your tax return. Statutes of limitations prevent enforcement of a law after a period of time passes. If you file your tax render, the legislative act of limitations prevents the IRS from conducting an audit of your taxes for a finical year after 3 years have passed since you filed that return. theoretically, it could be 25 or 30 years late and the prison term specify will not have expired if you haven ’ deoxythymidine monophosphate filed your recurrence. But, when you do file a tax restitution, the general govern is the IRS ca n’t audit or assess newfangled taxes against you more than 3 years after the file date or the due date – whichever is late. But, if you filed a tax return and understate income by more than 25 %, the IRS has 6 years to audit and/or ass modern taxes against you. therefore, the quick you file, the quick the codified of limitations will run out for the IRS to assess new taxes against you and to audit your returns .
3. Don’t Forget To File Your State Returns
Every department of state that has an income tax has an information-sharing agreement with the IRS. Often, states are the foremost to notice you have n’t been filing your department of state tax returns. Due to their agreements with the IRS, the states will alert the IRS to the fact that you have n’t been filing your returns. If you ‘re curious about which states do n’t have an income tax, they are : Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Washington. New Hampshire does n’t tax earned wages but does tax investment income .
4. If You Receive A 1099 Or W-2, The IRS Will Look For Your Tax Return
The Information Returns Program ( IRP ) is a identical effective method acting of finding non-filers. If you receive an information return, like a W-2 or 1099, the IRS will try to match it to a tax return key. The IRS receives a copy of the W-2s and 1099s you receive. If there ‘s no fall to match it to, they ‘ll know you failed to file. Once the IRS knows you ‘re not file taxes, they ‘ll start sending computer-generated inquiries about your failure to file. If you ignore these IRS notices, the IRS will get more aggressive .
5. If The IRS Puts You On The Spot By Asking You If You Filed Your Returns, Do Not Lie
Lying to the IRS is a crime punishable by up to 5 years in prison. If a tax income officer or other IRS agent asks you if you ‘ve filed your tax returns, it will put you in a nasty spot. If you say you have filed your returns, you will have lied, which is a crime. If you tell the IRS you haven ’ thymine filed your returns, you ‘ve admitted to the crime of not filing your taxes. It ‘s credibly a good idea to tell the IRS you ‘ll have to check and get back with them. then, you may want to retain a tax professional, such as a CPA, lawyer, or enrolled agent, to represent you before the IRS.
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6. If You Don’t File Your Return, the IRS May File a Return for You
If you have n’t filed tax returns, the IRS may file for you. This is called a substitute for return ( SFR ). When the IRS prepares an SFR, they will do it based merely on the information available ( which may cost you if you earned more in former years and that is the only data that the IRS has to calculate your taxes due ) and you ‘ll entirely get your standard tax write-off. You could be married, but the IRS may prepare the SFR as if you ‘re single. If you have big deductions available had you itemized, you will lose those since the IRS will entirely give you the standard subtraction. This will leave the taxes due for an SFR a lot higher than they would have been had you filed your return on your own. You can still prepare your tax return after the IRS has filed an SFR. The IRS will normally accept your numbers in place of those on the SFR. If the IRS does n’t replace the SFR with your tax return, you can appeal that decision to the IRS Office of Appeals .
7. If You File Several Years’ Tax Returns At Once, The IRS Isn’t Going To Arrest You
The IRS alone uses criminal prosecution as a final resort. IRS policy is n’t to prosecute those who file their returns before the IRS pursues criminal prosecution. If you ‘re concerned about criminal pursuance, the IRS has 6 years from the sidereal day you failed to file a render to prosecute you. But remember, it is very rare that the IRS prosecutes person taxpayers .
8. You Can Get A Transcript Of Your Old W-2 And 1099 Information From The IRS If You Can’t Find Your Copies
If you ‘re preparing an old tax restitution, you ‘re going to need your tax documents for that year. It ‘s coarse for people to lose their old W-2s and 1099s. While you ca n’t get copies of these old information returns, you can get a transcript of your account that will provide you with the data from these forms. The easiest way to get this transcript is to use the IRS Get Transcript web site. While your transcript will provide you with the report income on your 1099s or W-2s, it wo n’t provide you with unreported income. This unreported income would be money that you have received in the ordinary course of clientele, if you operate your own clientele. You must put this income on your return or you could be found guilty of tax fraud. Where do you find the information for this income ? You ‘ll have to look at your honest-to-god clientele records and bank statements. The difficulty of compiling these old records is why it ‘s specially significant to prepare your tax fall every year if you ‘re freelance.
9. You Must File Your Returns On The Tax Forms For The Appropriate Year
If you ‘re filing a reappearance for a anterior tax year, you must use the allow form for that tax year. For example, if you ‘re filing an individual income tax return for 2018, you ca n’t use class 1040 for 2020. You must use the 1040 Form for 2018. It ‘s easy to get these old tax returns. The most convenient way to get the forms is to download them from the IRS Prior year Forms function of the IRS web site. other ways to get the previous forms include :
- Picking them up at your local IRS office
- Calling the IRS Forms Department at 800-829-FORM ( 3676 )
- Using respective tax software programs
- Contacting tax professionals, who normally have old forms
10. If You’re Liable For Penalties, Ask For A Penalty Abatement
When you file tax returns late, you ‘ll always have penalties assessed against you. Tax returns for anterior years will have a penalty of 25 % of the taxes due good for failure to file. If you owed $ 10,000 in taxes, you ‘ll have a punishment of $ 2,500 good for failure to file. How frequently do you spend $ 2,500 on anything ? On top of the late file penalty, there ‘ll be a “ failure to pay ” punishment. These penalties are substantial additions to your tax placard. If you are successful in getting the punishment removed, the IRS will besides remove the matter to that accumulated on the punishment parcel. It ‘s a good mind to ask for penalty suspension. The beginning basis for a penalty abatement that many taxpayers consider is the first Time Penalty Abatement program. This course of study is an model of the IRS ‘s efforts toward effective tax administration. To qualify for this penalty suspension program, you must meet the trace requirements :
- You did n’t previously have to file a return or you had no punishment for the 3 tax years anterior to the tax year where you received the punishment .
- You have filed all presently required returns or have filed extensions of clock to file .
- You have paid or arranged to pay any tax due .
Besides the first Time Penalty Abatement Program, there are respective other reasons you can request penalty suspension :
- IRS written advice caused the mistake that led to the penalty .
- You ‘re under a specific legal exception from the penalty. Disaster relief may qualify you for such an exception .
- The IRS settles with you because they ‘re at risk of losing litigation with you .
- You have a reasonable apologize for the return that caused you to incur the penalty. Examples of fair campaign include : long-run illness, disaster, and loss of records ( in some situations ) .
even if you receive a penalty abatement, the failure to pay punishment will continue to accrue until you have paid the tax in full. For this cause, you may want to wait until the tax part has been paid before you request penalty suspension. You can do this by filing Form 843. If you have n’t fully paid the tax, you can request penalty suspension by sending a letter or through a call call. The telephone may be the best manner since you ‘ll frequently have a decisiveness on the abatement before you get off the phone .
11. Get Your Return Filed Or You Could Lose Your Right To Claim A Tax Refund
You have 3 years from the due date of the return to file and claim a refund. In a convention year where April 15th falls on a weekday, this would mean you have until April 15th 3 years from that date to file and get your refund. But, you have until July 15 of 2023 to claim your 2019 tax refund. This is because the 2019 tax deadline – which would have been April 15 – was changed to July 15th because of the coronavirus pandemic. similarly, the deadline to claim a refund for 2020 is May 17, 2024, since the 2020 deadline has been changed to May 17, 2021, because of COVID-19. If you file an better return key to get a refund, you have the lapp codified of limitations for the rectify return as for the original return. If you got an extension to file your original restitution, you have three years from the date you filed the fall. This assumes you did n’t file belated. You may not know whether you have a refund ascribable. But, if you had taxes withheld, you probably do have a refund due. even if nothing was withheld, you may have money due through the gain income tax credit, the Affordable Care Act health indemnity premium credit, the child tax manage credit ( this can be up to $ 300 per month per child immediately ), or early refundable tax credits. There ‘s no reason not to file to get your refund. There ‘s no punishment when you ‘re owed a refund. There ‘s no terror of criminal pursuance for failing to file a return where you ‘re owed a refund. The fact is, if you do n’t file to get your refund, you may as well be writing a check to the politics for your refund. The money is yours, the government is merely holding it for you. You credibly need that money more than the government does .
12. If You Can’t Pay The Taxes Due On These Late Returns, Set Up An Installment Agreement Or Settle With The IRS
The downside of filing a tax return is you may have to pay taxes you ca n’t afford. The IRS has requital plans and settlement opportunities for people in your position. Do you think you ‘re the first person that could n’t afford to pay their taxes ? The IRS has a long history of dealing with taxpayers that ca n’t pay and has developed solutions. These solutions include Offers in Compromise ( OIC ), partial derivative Payment Installment Agreement ( PPIA ), or presently not Collectable ( CNC ) status. In abruptly, the IRS will work with you when you ca n’t afford to pay .
13. Certified Mail May Not Be the Best Way To File Your Late Returns
You can file your old tax returns in several ways :
- You can file in person at the local anesthetic IRS office. If you do this, bring a copy of your returns that you will keep. Have the IRS time-stamp the acknowledge on the first foliate of each of your copies of the returns .
- The most convenient way to file is electronically. With this method, you ‘ll get an electronic acknowledge .
- You can file by mail. If you use attest or registered mail with the return receipt requested, you will have proof that you sent something to the IRS. Unlike the beginning two methods mentioned above, you wo n’t have validation of what you sent. For this reason, in-person filing or electronic file is safer than filing by mail .
14. If You Need Help Preparing Your Tax Return, Hire A Tax Professional
Filing several years of back taxes can be a daunting tax. It may be a full idea to hire a tax professional. If you have a unmanageable prison term affording a tax professional, the postdate programs may be able to help you :
- The Volunteer Income Tax Assistance ( VITA ) is a program for lower-income taxpayers, those with disabilities, and taxpayers who have a restrict ability to understand English. The Tax Counseling for the Elderly ( TCE ) program and AARP programs are for aged taxpayers. While the VITA and TCE sites focus on preparing your taxes for you, the AARP sites focus on helping you prepare your own taxes. The IRS has free tools to find locations for these programs near you .
- If you ‘re in the military, the MilTax program may help you .
- The IRS besides has a partnership with certain tax software companies to provide lower-income taxpayers with complimentary software to prepare their taxes and file their tax returns. Unlike the early programs that offer some professional aid, this is a self-help course of study .
If you have failed to file tax returns for some years, it ‘s a commodity idea to look into the position and see about filing those returns. Doing so could save you a lot of money in the shape of penalties and interest. In rare cases, it could prevent criminal penalties. On the cocksure side, you may evening make some money out of the process through refunds. In 2019, the IRS reported it had $ 1.4 billion in unclaimed refunds. If the IRS owe you, do n’t wait excessively late to claim your money. Written By :
Attorney John CobleLinkedIn John Coble has practiced as both a CPA and an Attorney. John ‘s legal specialties were tax jurisprudence and bankruptcy law. Before starting his own firm, John worked for police offices, accounting firms, and one of America ‘s largest banks. John handled about 1,500 bankruptcy cases in the eig … read more about Attorney John CobleRead About the Upsolve Team