5 Tips If You Haven’t Filed Your Tax Returns
All American citizens know how important it is to file your tax returns on time, however, there are many who, for a number of reasons, haven’t done so for years. The good news is if your accounts are not up to date, but the IRS owes you money, you won’t have to pay any penalty charge. Unfortunately, if you haven’t filed on time and you owe taxes, you may be in for quite a big trouble.
You have no taxes due and you haven’t filed
How you file your tax returns matters, because you may be missing out on good refunds. Lifehacker quoted CNN on the IRS announcement that there are $950 million waiting to be claimed by one million taxpayers who haven’t filed their returns in 2012 and therefore, not claimed their refunds. If you are one of the people who didn’t bother to file in 2013 because you were certain you don’t owe anything to the IRS, you better file your return ASAP. Taxpayers only have 3 years to claim refunds before they are void. Do you really want to lose extra money?
You owe taxes, but you haven’t filed
Not paying your taxes is an offense, so by withholding payment, you are breaking the law. As a result, you may be fined up to $25,000 per tax year, for which you’ve missed a payment. It gets uglier – you may even have to go to prison for up to a year. On the positive side, such scenario is less likely, because the IRS would prefer to collect what you owe and they have many schemes to fit the payments around your lifestyle, just so that they can get their money after all. There are more penalty charges though:
- 5% per month of the unpaid amount (capped at 25% after the 5th month)
- 0.5% failure to pay penalty per month for every month you had owed money
What happens if you don’t pay? IRS can:
- Freeze your accounts
- Take money directly from your wages
- Put a lien on your home/property
What options do you have to minimize your costs
There’s no way you will be forgiven the taxes you owe, but in some cases, you may be spared the penalty charges. For such to happen you will have to prove that you had a valid reason, called “reasonable cause” for not paying your taxes on time. The IRS is unlikely to waive interest charges, so you should be mindful of that too.
What qualifies as “reasonable cause”
- The death of a family member or a person, really close to you.
- You have gone through a divorce and as a result, your ability to make payments or deposits has been materially impaired.
- You were absent for reasons beyond your control – you went to prison, a rehab or have been held a hostage abroad.
- Destruction of your records due to a natural disaster or casualty.
- Wrong advice was given by a financial professional, such as tax advisor or CPA
- The wrong or misleading advice was given by an IRS officer in writing, on the phone or in person.
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You will have to file for all years you have missed. Try to collect as much paperwork as possible and if some are unavailable put the most accurate information to the best of your knowledge. You can also request a transcript of your unpaid taxes from the IRS.
After you have filed all your outstanding returns you will have to pay the amount you owe. In particular cases, you may be eligible for an offer in compromise, installment payment plan, and a hardship status. Details about all these and other schemes available to taxpayers through the IRS you can find in our previous post here.
Make sure you always turn to the right professional when it comes to your taxes. Inexperienced and dodgy CPAs and tax advisors can cost you a lot of money and create significant trouble for you. FAS CPA & Consultants have an impeccable reputation in Miami and we are ready to assist you with all your tax matters.
Readers should note that this article is only intended to convey general information on these issues and that FAS CPA & Consultants (FAS) in no way intends for the contents of this article to be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. This article cannot serve as a substitute for such professional services or advice. Any decision or action that may affect the reader’s business should not rely solely on the contents of this article, but should rather be consulted on with a qualified professional adviser. FAS shall not be responsible for any loss sustained by any person who relies on this presentation. This article is subject to change at any time and for any reason.