If you have unfiled tax returns, you may have many questions on your mind, especially if this has happened for the first time. Questions such as, how the IRS contacts taxpayers and what the consequences of not filing tax returns are. These are all common questions among taxpayers who have not filed their tax returns. While the Law Offices of Nick Nemeth can help you with unfiled tax returns and scores of other IRS-tax debt-related issues, it is important for every taxpayer to have fair knowledge about common tax problems such as unfiled tax returns. In this blog, we discuss the frequently asked questions about unfiled tax returns, the consequences of years of unfiled tax returns, and ways in which IRS tax attorneys in Fort Worth help taxpayers with back taxes.
Frequently Asked Questions about Unfiled Tax Returns
In this section, we answer five frequently asked questions about unfiled tax returns.
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Is failure to file tax returns considered a crime?
Intentional failure to file a tax return is considered a misdemeanor, while any form of tax evasion is considered a felony, with a maximum prison sentence of 1 year and 5 years, respectively. Taxpayers can avoid criminal prosecution for unfiled tax returns with timely guidance from a professional IRS tax attorney in Fort Worth.
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How does the IRS contact taxpayers who don’t file returns?
Typically, the IRS sends a notice through mail. These communications serve as a reminder to taxpayers. Delinquent taxpayers may also receive a notice demanding that they file returns within 30 days. If the recipient ignores the initial warning mail, the IRS resorts to more stringent actions, including conviction.
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What are the consequences of failing to file tax returns?
If a taxpayer does not file their tax return, the IRS charges a penalty that is usually 5 percent of their outstanding tax liability but can go up to 25 percent. The tax return filing status is assessed every month. In cases of unfiled tax returns, any entitled refund stands canceled. Even if a taxpayer files bankruptcy, they can’t include tax debt unless they are up to date on their filing obligations. In worst-case scenarios, defaulting taxpayers may face jail terms and fines of up to $25,000. We will discuss the consequences of unfiled tax returns in detail in the next section of the blog.
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Can I file a tax return after the annual deadline?
Yes, you can. You can also e-file your tax return up to six months after the lapse of the original deadline. However, it is advisable to file tax returns on time to avoid unwanted penalties and interest. In case you wish to claim a refund, filing unfiled tax returns is compulsory within three years of the due date.
While it is a good practice to file tax returns on time; sometimes taxpayers miss the deadline due to unavoidable causes. When it comes to tax issues, such as unfiled returns, the IRS means business. If things seem to get out of hand, and you can’t handle it on your own, do not worry. We, at the Law Offices of Nick Nemeth, are always ready to help you with all sorts of IRS tax debt problems. Seeking an attorney’s help on back taxes will help you avoid punishing consequences.
Consequences of Unfiled Tax Returns
Negligence or the inability to file a tax return, when you owe the IRS, is an invitation to trouble. Many taxpayers are unaware of the fact that an unfiled tax return is worse than filing a return and not paying the due amount. If you are unable to pay your taxes, the IRS has avenues to help you pay what you owe the agency. Not filing a tax return is a crime, and you could be severely punished by the IRS. This section of the blog gives a brief overview of the four main consequences of not filing a tax return.
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Paying penalties and interest
Not filing a tax return exposes you to penalties and interest payments. If you owe taxes, two penalties you may face include:
- Failure-to-file-penalty: A late penalty, which is 5 percent of the total tax due, is imposed when you do not file a return. The penalty grows for every full or partial month you don’t file your taxes, and can grow to 25 percent.
- Failure-to-pay-penalty: When you don’t pay outstanding taxes, the IRS imposes a penalty of 0.5 percent of what you owe.
The IRS also charges interest on unpaid taxes, which is between 3 and 10 percent, on a quarterly basis.
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Loss of refund and other tax benefits
The IRS gives you a time period of three years to file unfiled tax returns to claim a refund. If you don’t file the tax in time, consider any money owed to you by the IRS lost. The same time limit is applicable when taxpayers want to claim a tax credit. If you don’t file a return, you cannot claim the credit in later tax years. Self-employed individuals do not get any disability benefits or social security retirement if they don’t file their returns.
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A substitute return is being filed on your behalf
If you do not file a return, the IRS might file a substitute return using your 1099 or W2s forms. While you may think of a substitute return as relief from the hassles of filing unfiled tax returns, it eventually costs you more in the long run. The reason being that when a substitute return is filed, the taxpayer gets one exemption and a standard deduction. If you qualify for a tax credit, have a substantial amount of itemized expenses, or dependents, none of them would be considered as a waiver, which will reflect in the form of an exaggerated tax liability.
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Face collection actions
If the IRS performs an assessment of the substitute return, you are close to facing collection actions. The type of enforcement depends on the amount you owe the IRS and the circumstances that led to your non-filing of your tax return. The IRS may seize your assets, including bank accounts, home, vehicle, or other personal property, place a lien against your property, or turn the issue into a criminal case. If the IRS takes hold of your assets, SSI, child support payments, and disability benefits are exempt from seizure.
The IRS has an Information Returns Program (IRP), a computer system to match W-2 wage statements with the 1099 income reports of employers. If the system doesn’t find a match with the 1099 report, it automatically starts Taxpayer Delinquency Investigations to generate notices to the last known address. If there is no response, the IRS contacts the taxpayer, requesting that they file unfiled tax returns within 30 days. The IRS expects every taxpayer to file their returns and pay any amounts owed the agency by the 15th of April every year.
You may request the IRS to extend the deadline for a few months, or consult an IRS tax attorney in Fort Worth for assistance. As mentioned earlier, failure or negligence to file a return can cause financial distress, and the IRS may consider you a criminal non-filer, which has legal consequences. If you have a serious IRS problem, such as a delinquent tax return, speak with Nick Nemeth at the Law Office of Nick Nemeth, PLLC.
4 Ways to Settle Unfiled Tax Returns with the IRS
If you want to file and settle unfiled tax returnswith the IRS, consult an experienced IRS tax attorney in Fort Worth at the Law Offices of Nick Nemeth. We have a team of reputable IRS tax relief attorneys who have successfully helped many taxpayers settle their IRS debts. Here is a brief overview of some ways to settle unfiled tax returns.
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Offer in Compromise
If you owe the IRS taxes more than you can afford to pay, you may be eligible to settle the debt for an amount less than the actual amount owed. In such cases, you need to apply for an Offer in Compromise (OIC) after checking your eligibility. OIC is a payment plan that requires a taxpayer to pay either a lump sum amount or follow a short term payment plan. Schedule a consultation with one of our tax attorneys to check whether you qualify for OIC.
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Installment Agreement
Under the Installment Agreement provision, the IRS allows financially-distressed taxpayers to pay their outstanding debts through monthly installments over a stipulated period. If a taxpayer meets the minimum requirements and the IRS is convinced by their reasoning, it would stop all collection efforts and also eliminate the possibility of wage garnishments, levies, or other enforced collection methods.
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Currently Not Collectible Status
Under the Currently Not Collectible program, the IRS releases a taxpayer from paying the unpaid taxes for a stipulated time. The IRS will declare a taxpayer “Currently Not Collectible” and unable to pay for the stipulated time after receiving certain evidence. It is however a temporary provision that simply buys some time for taxpayers to clear their outstanding tax liabilities.
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Tax Filing Extension
Tax filing extensions help taxpayers who are unable to file their taxes before the deadline. In such cases, taxpayers can request an extension of the deadline by filling out Form 4868. It is, however, important to remember that the provision only gets you an extension on the filing date; the date of payment remains the same, which is usually April 17th.
Need Help with Unfiled Tax Returns? Contact Us!
Dealing with unfiled tax returns requires a thorough knowledge of IRS tax laws, which is the core competency of the team at the Law Offices of Nick Nemeth. Discuss your case with an experienced IRS tax debt attorney and take the burden of unfiled tax returns off your shoulders. Whether you are looking for an IRS tax relief attorney in Fort Worth, Texas, or any area in Texas, look no further than the Law Offices of Nick Nemeth. For a free case evaluation and consultation, simply call (817) 623-5399 or fill out our contact form, and we will take it from there.
