Life can get busy, and sometimes, things slip your mind, especially when you’re moving in eighteen different directions at the same time. However, when that “something” consists of your tax returns, you could be in quite a bit of trouble with both the state and the IRS. Even if you regularly pay taxes and should be receiving a refund every year, you still need to file your returns by the deadlines set forth by both the Federal Government and the government of the state in which you reside. Otherwise, you face having to pay steep penalties, having your refund check delayed, and other serious issues. If you owe back taxes, you could face even more severe financial ramifications, such as having liens placed on your property or having your bank accounts levied.
What to Do If You Haven’t Filed Your Taxes in Years
No matter the reason is as to why you haven’t filed your taxes, it’s important that you take the first step necessary to remedying the situation. Although you should always seek the help of a professional tax expert who can walk you through the situation and negotiate with the IRS or state on your behalf, there are some initial actions that you can take on your own.
If you haven’t filed your taxes in years, the IRS will often file a return for you. This is called a substitute return. They will take all of the information provided to them in your name, including W-2 and 1099 forms, and put together the return that you should have filed. These return do not include deductions, so they may be incorrect, as the IRS has no idea of knowing which deductions you would including in your filing. Also, if you’re owed a tax refund based on your substitute return, you won’t receive it. Instead, you’ll be penalized for not filing.
In order to find out if the IRS has filed these substitute returns on your behalf, you can have a professional order account transcripts from them. This will show a listing of the returns that you haven’t filed, any substitute returns filed on your behalf, and the actions and penalties assessed by the IRS. It’s a good starting point when trying to determine next steps.
What Is the Punishment for Not Filing Taxes?
The IRS and state do punish people who do not file their tax returns on time every year. There are many monetary penalties that can be assessed on top of any amounts that are due to the IRS or the state. While those who are owed a return may face late filing penalties, those who owe taxes are penalized even more harshly and will be charged both penalties and interest on money owed to them.
The breakdown of penalties and fees for those who owe money to the IRS on non-filed returns is as follows:
Non-filers are charged 5% of the amount owed every month or part of the month starting the day after the due date
There is a 25% maximum penalty that is reached should the amount due and return remain unfiled for five months
After 60 days have passed with a return filed or payment remitted, the late filing penalty becomes either $135 or 100% of the amount owed to the IRS, whichever is smaller
On top of the penalties for not filing or paying taxes, the IRS will charge interest on the amount owed to them, starting ten days after they place a levy on your account.
How Long Do I Have to File My Taxes for Previous Years?
The IRS wants you to file your tax returns, no matter how late they are. If they have filed a substitute return on your behalf, you can amend it to include all of your deductions and other information that they may have missed. This can make you eligible for a refund, as long as those amended returns are filed within three years of the original deadline.
Whether you owe the IRS back taxes or are past the three-year deadline to receive a refund for overpayment, you need to file every return that you have failed to file. The IRS and state prefer you to file everything, no matter how late, so their records are complete and correct. Keep in mind that penalties may still apply, even after you have filed all of your past returns.
Can I Go to Prison for Not Filing My Taxes?
Although some people do go to prison for failing to file their taxes, actor Wesley Snipes is a prime example, in most cases, this does not happen. The average person will not be sent to prison for either failing to file returns or filing late. However, if you do owe the IRS or state money, they will do everything in their power to obtain those funds. Some possible collection avenues include:
Putting liens on assets that you own, like vehicles and houses
Taking any potential tax refunds owed to you on recent filings
Freezing your bank accounts
Suspending your passport, driver’s license, and professional licenses
Setting up payment plans for the amount due
With many other options to pursue, the IRS or the state will most likely not send you to prison for back taxes owed. That only tends to occur in very high-profile cases where millions of dollars are past due. While it certainly can happen, it’s very rare. The IRS will pursue all other options first.
Can Back Taxes Hold Up a Refund Check?
The short answer here is “yes.” Owing back taxes can indeed hold up a refund check, and in many cases, those funds will be used towards your existing balance, meaning that you will never receive a refund check at all. However, if the IRS does owe you a refund, you may be eligible to receive it.
Keep in mind that if you are owed a refund check for the current year, you have three years to submit a tax return and claim that refund. Depending on the circumstances, the IRS may charge you a late filing penalty that will be taken out of the return or returns before you receive them.
Seeking Help If You Haven’t Filed Tax Returns
If you are late in submitting your tax returns, whether you haven’t filed in several years or are simply overdue on your current return, you’ll need professional assistance when working with the IRS. Submitting those returns or attempting to amend substitute returns on your own can be a tricky and tedious endeavor. The process may prove overwhelming, especially if you’re afraid of facing additional penalties or owe the IRS or state a good deal of money in back taxes.
No matter the situation, it’s always a good idea to seek out a professional tax accountant for guidance. An expert in the field of tax law, someone with plenty of experience in working with the IRS, can walk you through every step of the process, from obtaining your tax transcripts to getting those returns filed to setting a payment plan in place. With little room for error, this is not a situation that you should try to navigate on your own.
Contact Us for Assistance
If you have questions about filing past tax returns, haven’t filed taxes in a few years, or are facing penalties from the IRS and state, contact us. The tax advisors at the Enterprise Consultants Group can answer your questions, discuss your rights, and provide actionable options. Please contact us online or at (800) 575-9284 today to schedule a free and confidential consultation to see how we can help you.
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