According to the IRS, roughly 10 million Americans fail to submit their federal income tax returns each year. Taxpayers fail to submit their tax returns for various reasons; some just delay; others do not comprehend their filing needs; and, in rare cases, taxpayers actively fail to file to avoid their responsibility to disclose their income and pay their tax liability.
All of these taxpayers are referred to as “non-filers” by the IRS. In most cases, difficulties encountered by non-filers may be satisfactorily remedied if the taxpayer seeks expert legal assistance and resolves the issue willingly. On the other hand, a taxpayer’s continued refusal to voluntarily comply with tax return filing and seek qualified legal assistance might have serious implications. A taxpayer may potentially face criminal tax prosecution in some situations.
What are the Consequences Of Not Filing Taxes?
The failure-to-file penalty or late-filing penalty is another term for the penalty for failing to file taxes.
- The penalty is typically 5% of the tax payable for each month or portion of a month that the return is late.
- The highest penalty for failing to file is 25%.
- If your return is more than 60 days late, the minimum penalty for failure to file is $435, or the amount of tax payable, whichever is less.
But there is some good news. If you have a valid excuse for submitting late, you may not have to pay the penalty.
How to Handle Unfiled Tax Returns
To deal with unfiled taxes, all you have to do is file them, which is easier said than done. If you have numerous years of unfiled returns, the IRS normally expects you to submit the most recent six years, although the actual number varies based on your circumstances.
If you have unfiled tax returns, you must do the following:
1. Gather the tax forms you haven’t filed from previous years.
Since the IRS updates the tax forms regularly, you cannot use the current year’s forms to file your previous year’s taxes. Old forms should be available on the IRS’s website. Alternatively, you can contact the IRS and request that the forms be mailed to you.
2. Compile your income information
If you don’t have your W2s or 1099-forms from the years you didn’t file, you can request them from your employer. Alternatively, you can obtain these forms by submitting Form 4506-T (Request for Transcript of Tax Return) and checking box eight.
3. Review your business records
If you are self-employed or operate a small business, you must examine your business records to determine your income, costs, and profit for the years you haven’t filed.
4. Look for information on deductions and credits.
You’ll need their information if you’re claiming children or other dependents on your tax return. Depending on the credits you intend to claim, you will also need information on daycare expenditures, state and local taxes, medical expenses, student loan payments, educational expenses, charity contributions, and retirement account contributions.
5. Get ready to file a penalty abatement request.
The penalty for not filing taxes might be severe, but you can request that the fines be waived. If you only have a single unfiled return, the IRS will usually waive penalties for “first-time offenders,” but the procedure might be more convoluted if you have years’ worth of unfiled returns. The IRS will never waive fines unless you request it; this is never an automated procedure.
6. Make a plan to deal with your tax liability.
Depending on your circumstances and the amount you owe, you may be able to pay off your back taxes in full, make monthly payments, seek to settle the taxes for less than you owe, or get hardship status to prevent collection activities against you.
Filing unfiled returns might be difficult. Working with a professional will make the process smoother and guarantee you obtain the best conclusion possible.
The Bottom Line
Fines for failing to file taxes can be substantial, and the IRS will frequently pursue aggressive measures to recover penalties and interest. If you haven’t filed a tax return, you should contact a knowledgeable tax attorney right away to explore your alternatives and verify you’re fulfilling your tax responsibilities.
Axiom Tax Resolution Group is a company that offers reliable tax relief solutions in Birmingham, AL. When you need assistance in deciphering IRS notices or need IRS debt relief, we are the people for you. Schedule a consultation today!