Dont Forget Your State
Unless you live in Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, or Wyoming, the IRS is not the only tax agency to worry about. All 41 other states have their own income tax reporting requirements, and a few cities do as well. In many cases, if you havent filed a tax return, you may be contacted first by your state tax collector, not the IRS. If this happens, you can bet the IRS is not far behind. All states except Nevada have agreements with the IRS to trade tax information about their residents. In this electronic age, the exchange occurs automaticallyif one taxing authority finds you arent filing, the computers will turn you in to the other. If you file a late IRS return, be sure to file a state return as well.
If You File Several Years Tax Returns At Once The Irs Isnt Going To Arrest You
The IRS only uses criminal prosecution as a last resort. IRS policy isn’t to prosecute those who file their returns before the IRS pursues criminal prosecution. If you’re concerned about criminal prosecution, the IRS has 6 years from the day you failed to file a return to prosecute you. But remember, it is very rare that the IRS prosecutes individual taxpayers.
How To Avoid A Failure
If youre going to miss the tax-filing deadline, help yourself avoid the penalty for not filing taxes by getting an extension to file your tax return. A tax extension can get you an extra six months to get your tax return to the IRS.
Remember, however, that a tax extension only gets you more time to file your tax return. It does not get you more time to pay your taxes. Some people, such as natural disaster victims, certain members of the military or Americans living overseas, may automatically get more time to file.
If you miss the tax extension deadline, though, that failure-to-file penalty could come back to haunt you.
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Do You Need To File Every Single Year
In almost every case we see, no, you do not need to file every year. The IRS generally wants to see the last seven years of returns on file. But it depends. If the IRS filed for you, you’ll want to replace the Substitute for Returns with returns of your own to reduce the balance they assessed. If you’re getting refunds and won’t owe taxes, you can focus on the last four years only
Refunds May Be Denied
If you file too late, you may lose your tax overpayment refund. .) Only by filing within two years of the original due date , will you qualify for the refund. Filing more than two years from the original due date qualifies you for the refund in two instances only:
- If you pay any of the tax after the due date of the return, the refund time period is extended to two years from the payment date. For example, your tax return was due April 15, 2008. Instead of filing the return, you file an extension request. On August 15, 2008, you file another extension request and make a payment for the amount of taxes you think you will owe. You dont file your return on October 15, 2008, and in fact dont get around to filing it until June 2010. Thats more than two years after the April 15, 2008 date, but less than two years from the August 15, 2008 date when you made a payment. You discover that your August 15, 2008 payment was too much. When you file your return in June 2010, youll be entitled to a refund.
Getting Your Returns to the IRS
Get your late return to the IRS by either:
Mailing. Late-filed returns are more likely to get delayed in processing or lost by the IRS than current ones. If you plan to mail in your late returns, send them by certified mail, return receipt requested, to the IRS. Again, hand filing is the better way to go.
Electronic filing. You can electronically file a late return. Get an electronic receipt back from the IRS and keep it for your records.
Example:
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Decide Whether You Want To Pay Or File Your Own Returns
If the IRS has filed substitute tax returns on your behalf, you have a choice on how to proceed. One option is to simply pay the amount of tax and accompanying fees that the IRS thinks you owe. This tax payment process is relatively simple, and the IRS does have some tax relief plans if you canât pay the full amount immediately, including an installment agreement.
Of course, paying the tax liability and fees will clear up the issue of a tax levy, but it wonât necessarily get you the tax forms that you need for other purposes, like a new mortgage loan. Additionally, since there are no deductions on the IRS substitute returns, youâll likely wind up paying more than you need to.
If you decide to file tax returns yourself for the missing years, you may wind up paying far less and youâll have the tax forms you might need for future financial decisions.
What To Do If You Haven’t Filed Your Taxes In Years
Theres no penalty for filing your taxes late if the IRS owes you money. But if you owe them money, things can get very ugly, very fast. Heres what you need to knowand doif you havent filed your taxes in years.
First, if you think youre due a refund, your primary concern should be that you are leaving money on the table. A surprising number of people miss out on money theyre owed, as $1.5 billion in unclaimed refunds remain outstanding as of last July, according to the IRS. But the chance to claim your share of that money doesnt last foreveryou only have a three-year window. Since theres no penalty for filing a late return, youll definitely want to do so if you are owed money.
But lets say you havent file and you owe money. Or maybe you filed but havent paid what you owe. Either way, you could be in trouble with the IRS.
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What Happens If You Don’t File Your Taxes For Years
If you do not file your taxes for years, the IRS can take legal action against you. This can include filing a lien against your property or seizing your assets. In some cases, you may also be subject to criminal charges. If you are facing any of these consequences, it’s important to speak with a tax attorney or another tax pro as soon as possible.
Why Is Form 16 Required
Form 16 can be a crucial document for the following reasons: It works as a proof that your employer has deducted tax from your salary and deposited it with the government. It helps in the income tax returns efiling process. It is usually requested by banks and financial institutions when you approach them for loans.
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What Happens If You Refuse To File Taxes
If penalties and interest arent discouraging enough and you outright refuse to file taxes, the IRS can enforce tax liens against your property or even pursue civil or criminal litigation against you until you pay. The severity of your refusal will determine the path the IRS will take.
Refusing to file taxes could result in the IRS filing a return for you. This return, called a substitute for return, isnt always the most favorable for your situation.
The IRS will use the information it has available but wont give you any of the available tax credits or deductions that you might have used if youd prepared your own tax return.
As a result, youll be set up to pay the maximum possible taxes while also paying the associated penalties for failing to file on time or pay your taxes, in addition to any interest charges youve accrued.
What To Do If Youre 3+ Years Late
Paper file the overdue return
You can still use tax software if your return is more than three years old, but youâll have to print out your return and mail it in. The sooner you can get it in the mail, the better.
I highly recommend sending it using Certified Mail. That way, youâll have proof that your return was delivered.
Be sure youâre using the correct form year when submitting old returns! You canât file a 2016 return using 2021 forms. Any tax software you use will have to be able to support the filing year youâre dealing with. If youâre unsure, it might be worthwhile to involve a tax professional.
In a perfect world, you donât fall behind at all. And tools like Keeper can make it more realistic to stay on top of your annual filings with our easy tax-filing app.
But at the end of the day, it doesnât matter how far behind you are. If you take the appropriate steps to make amends, you wonât face jail time and may even get penalty relief. Follow the steps above and youâll be ordering guac again in no time.
Keeper Staff
Keeper is a delightfully smart tax filing software that’s especially useful for people with 1099 contracting and freelance income. Our blog breaks down IRS guidance with real-world examples and analysis by tax professionals â empowering taxpayers to save money and take control of their finances.
Find write-offs.
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Failure To Pay Penalty
A failure to pay penalty applies if you dont pay the tax you report on a tax return by the due date or an approved extended due date. The penalty is calculated as a percentage of the taxes you didnt pay: 0.5% of your unpaid taxes for each month the balance goes unpaid.
The maximum penalty the IRS can charge is 25% of your unpaid taxes. The IRS charges interest on the penalty here, too.
If you have to pay both a failure to file penalty and a failure to pay penalty in the same month, the IRS reduces the amount you owe. The combined penalty comes out to 5% for each month or part of a month your return was late.
For example, instead of hitting you with a 5% failure to file penalty for a month, the IRS will charge a 4.5% failure to file penalty and a 0.5% failure to pay penalty, for a total of 5% of your unpaid taxes.
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The above article is intended to provide generalized financial information designed to educate a broad segment of the public it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.
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Why Didn’t You File Your Back Taxes
- You knew you’d owe taxes and feared the consequences, so you didn’t file.
- You couldn’t find the records to do them and the years compounded.
- You divorced, your “ex” was the filer, and now you’re lost.
- Your accountant died and you panicked and stopped filing.
- You have so many years to file that you’re paralyzed with fear and inertia.
- You’re afraid that investigating your situation with the IRS will stir up a bees’ nest.
What To Do If Youre 1+ Years Late
E-file the overdue return
The IRSâs e-file program is open for the current year and previous two years. So if youâre still within that window, be sure to e-file your return.=
Not only is e-filing faster and more secure, it involves using a tax filing program, which usually minimizes errors.
Be sure to calculate your penalties and include those with the payment. The sooner you get them paid, the less interest youâll accrue.
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File Your Missing Returns
You may want to file your old returns before a demand is made. There’s no time limit for submitting a previously unfiled return. However, if you’d like to claim your refund, you have up to 3 years from the due date of the return. It may be a good idea to speak with an experienced tax attorney or CPA before amending or filing old returns. Here are some benefits of getting missing tax returns filed:
- Protect your Social Security benefits: If you’re self-employed and don’t file, you won’t receive credits toward Social Security retirement or disability benefits.
- Avoid issues obtaining loans: Loans may be denied or delayed if you cannot prove income by providing tax returns or reportable income.
- Not having to worry about your unfiled taxes: Once your tax issue is resolved, it will free up your time for more enjoyable pursuits.
Filing A Tax Return When You Live Out Of The United States
The long arm of the tax code does not stop at the U.S. border. If you live abroad and have income, you will still have to file a tax return . You must also have taxes withheld or pay quarterly estimated taxes if you are working abroad. But the tax bite may be substantially reduced if you qualify for a foreign earned income exclusion of $85,700 per year , the foreign housing exclusion, and the foreign housing deduction.
You may also owe taxes to the government of the country where you reside. Some countries give you credit for taxes you pay to Uncle Sam others wont. Also, estate and inheritance tax laws vary widely across the globe.
Renouncing your U.S. citizenship to beat the IRS wont work, either. You remain subject to U.S. tax laws for ten years after renunciation! Norman Dacey, author of How to Avoid Probate, found this out when he became an Irish citizen. He challenged this law in the U.S. federal courtsand lost.
There is one bit of good news. While you are subject to U.S. tax laws, it is very difficult for the IRS to grab your wages or assets located outside of the United States. Some countries, mostly in Europe, have treaties with the United States in which their tax agencies can cooperate with the IRS to collect from Americans, but most governments place a very low priority on working these kinds of cases. You claim the Foreign Earned Income tax exclusion on IRS Form 2555.
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Why Should You Find A Tax Accountant To File Your Tax Returns
- It’s the law. Not filing a tax return can be a felony.
- It’s hard to live an adult life as a non-filer. Buying or refinancing a house usually requires that you’ve filed your returns, for example.
- If you want to get married, not filing might be considered a deal breaker to a future spouse.
- The IRS might file substitute-for-returns for you without deductions and you’ll owe more taxes than if you’d filed them yourself.
- Your passport may not be issued by the federal government if you haven’t filed your returns, making it hard to travel outside the U.S.
- If you’re self-employed, you might be missing out on increased Social Security contributions for when you retire.
- To get health insurance on a health insurance exchange or healthcare.gov, which require you to have filed.
- You might need to file your recent tax returns to get student loan aid for your kids .
- To reduce your vulnerability to identity theft. Our recent observation has been that 50% of multi-year non-filers have experienced a malicious attempt to intercept their refund and/or file under their social security number.
Tips If You Havent Filed Taxes In Years
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In a Nutshell
If you haven’t been filing your federal income tax returns, it’s a good thing youâre here! If you haven’t been filing your tax returns for years, you could avoid a lot of trouble 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 old returns.
Written byAttorney John Coble.
If you haven’t been filing your federal income tax returns, it’s a good thing youâre here! If you haven’t been filing your tax returns for years, you could avoid a lot of trouble 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 old returns.
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Failure To File Penalties
If you dont file for an extension, or fail to file by the extended deadline, you will start to face penalties. Failure to file penalties result in a 5 percent penalty each month on any unpaid taxes, capping at 25 percent. Here is how it breaks down:
- First month: 5 percent of tax liability
- Second month: 5 percent of tax liability,
- Third month: 5 percent of tax liability
- Fourth month: 5 percent of tax liability
- Fifth month: 5 percent of tax liability
There are some cases, including natural disasters and military service, that the government will forgive failure to file penalties. But unless you fall under one of those exemptions, expect to pay the penalty. The IRS can also recommend jail time for people who fail to file their taxes, though such cases are rare.
State laws vary considerably, so check what your local laws are for failure to file.