Unfiled Tax Returns
So you haven’t filed a few tax returns? Welcome to the club. Millions of Americans haven’t filed at least one tax return. Others haven’t filed tax returns for numerous years. IRS statistics show that every year over 20 million Americans don’t file their tax returns on time. Granted, in many of these cases no tax returns are required to be filed; however, that’s still a lot of unfiled tax returns that should have been filed by taxpayers who simply ignored their responsibility to file on time.
What happens to late filers?
Individuals who file their tax returns late subject themselves to late filing and late payment penalties and interest in addition to wage garnishments and bank levies and other enforced IRS collection actions. Tax liens can be filed at county courthouses that can tie up real estate sales and adversely affect credit scores and the ability to borrow money to buy automobiles and homes.
Are there penalties for not filing tax returns?
Indeed there are. IRS failure to file penalty runs at 5% a month up to a maximum of 25% limit after just five months. Failure to pay penalty is an additional 0.5 percent per month of your unpaid taxes. These penalties can add up really fast on multiple years.
Can IRS file for unfiled tax returns?
Indeed they can. IRS has record of all of your income documents… your W-2s and your 1099s from your employers and the people and companies that paid you for work and services that you performed for them. The IRS computer system can take all of that income and add it all up and come up with a grand total of all of your taxable income. And they do this without giving you the benefit of any business expenses or deductions or expenses of any kind whatsoever – none!
And then they compute they highest possible income tax on that highest possible taxable income on you.
They call this kind of income tax return a Substitute For Return. Read more about it here.
What’s the solution to all my unfiled tax returns?
The answer is really pretty obvious. Your tax returns should be filed. Our business policy is simple. We contact IRS for you. We get them to send directly to us all of your income for all of your unfiled tax years. That way we have a record of exactly what your income was for all of your unfiled years. Then we prepare those tax returns for you. We explain it all in much more detail in the main part of our website. Read more about it here.
Should I accept the IRS Substitute For Returns?
Only in rare cases will an IRS Substitute For Return be equal to or better than a tax return prepared by you or for you by a professional. The IRS computer system is not designed to prepare tax returns with the taxpayer’s best interest in mind; it is designed to generate the highest amount of tax possible.