If you haven’t filed taxes for a few years, first and foremost, take a big breath. It’s not great news, but it’s not the end of the world either. You might like to know that you are not alone; there are roughly 6 million non-filers in the U.S every year. There are many reasons people do not file, with IRS research showing that often people do not file in years that they have status changes, like the death of a spouse or a divorce. Emotional and financial hardships are also cited as reasons that people do not file their tax returns on time. There are also people who have simply procrastinated.
No matter what the reason, you need to know that the only way to deal with the back taxes is to get compliant and file your taxes. There’s no way around it. If you don’t, the IRS will determine what they think you should pay, and they will begin to put penalties and interest on top of what they estimate your tax liability to be.
Although putting off filing your tax return may not have immediate and obvious consequences – it will eventually catch up with you; and the IRS has a lot of leverage they use to make things difficult for you in order to gain compliance.
The good news in all of this is that there are ways you can get back taxes help. If you need to know whether you must file or not, or if you know you need to file but are avoiding it because you cannot pay the amount due on the return, the IRS offers assistance; or you can hire someone to help you with your filing. You should look to find someone with the knowledge to advise you on your options for submitting an Offer in Compromise or setting up a payment plan with the IRS if you aren’t in a position to pay the amount due in a lump sum.
There are many problems that can arise when you don’t file your tax returns for years, including penalties and interest assessments, an IRS Tax Lien, or an IRS Tax Levy. In addition to the advantage of being compliant, and a good citizen, by filing your taxes; you might also want to consider these reasons for filing:
• Keep your refund or credit. If you are eligible for a refund but don’t file your taxes, you can’t be penalized but you could lose your refund. Waiting too long to file puts you at risk for losing the refund altogether – the window for claiming a refund is three years. Once the three years have passed, unfortunately the refund statute prevents the issuance of a refund check and the application of any credits, including overpayments of estimated or withholding taxes, to other tax years that are underpaid. However, the statute of limitations for the IRS to assess and collect any outstanding balances does not start until a return has been filed.
• Get your Earned Income Tax Credit (EITC). Even if you are not otherwise required to file a tax return, you must file in order to receive this credit. The Earned Income Tax Credit (EITC) sometimes called the Earned Income Credit (EIC), is a refundable federal income tax credit for low-income working individuals and families. Congress originally approved the tax credit legislation in 1975 in part to offset the burden of social security taxes and to provide an incentive to work. When the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit. To qualify, taxpayers must meet certain requirements and file a tax return, even if they did not earn enough money to be obligated to file a tax return. The EITC has no effect on certain welfare benefits. In most cases, EITC payments will not be used to determine eligibility for Medicaid, Supplemental Security Income (SSI), food stamps, low-income housing or most Temporary Assistance for Needy Families (TANF) payments.
• Reduce a “Failure to File” penalty. When you miss the tax filing deadline, this penalty can be applied to you if you do not have a reasonable cause for the failure. The sooner you file, the more likely you are to be able to negotiate or decrease this penalty.
• Minimize a “Failure to Pay” penalty. Unless you can provide reasonable cause; if you did not pay your tax in full by the due date of the return you may also be subject to the failure to pay penalty. If the IRS has approved your application for an extension of time for payment due hardship; interest is still charged on taxes not paid by the due date, even with the extension of time to file. Interest is also charged on penalties.
Regardless of your reason for not filing, file your tax return as soon as possible – with our help or without. You can contact a tax professional or the IRS for help with filing delinquent returns. I personally specialize in helping individuals and businesses who are unable to fully pay their taxes, either back taxes, or due to current or late filing. If you cannot pay your taxes, do not let this prevent you from filing because tax settlement options may be available. You can get compliant and we can help. For more details contact us as quick as possible.
For more information on how to file a tax return for a prior year, visit our website.
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If you received a tax audit letter, CLICK HERE FOR HELP.
The tax firm of Mike Habib, EA in Whittier California provides back tax services help for clients throughout Southern California including Norwalk, Santa Fe Springs, Downey, Pico Rivera, Montebello, Hacienda Heights, La Habra Heights, West Covina, La Habra, Brea, Fullerton, Yorba Linda, Cerritos, La Mirada, Lakewood, Anaheim, Santa Ana, Long Beach, Compton, Torrance, Los Angeles, Pasadena, Beverly Hills, Santa Monica and throughout Los Angeles County, Orange County, Corona, San Bernardino County, Riverside County, the Inland Empire, the San Fernando Valley and the San Gabriel Valley.