Unfiled Tax Returns and IRS Non-Filers: Take Control of Your Tax Situation
IRS Non Filers
Unfiled Tax Returns
Being one of the many IRS non filers and not filing tax returns with the IRS is a serious offense. If you fail to submit your tax returns, you may end up owing the IRS a significant amount of money when you eventually do file.
Taxpayers who haven't filed their tax returns for one or more years due to various reasons may find it overwhelming to catch up all at once.
Sometimes, a lack of records, personal hardships, or negligence can cause individuals to fall behind on their taxes.
Fortunately, there are strategies available to deal with the problem of unfiled tax returns.
You create big tax problems when you are one of the many IRS non-filers and have unfiled tax returns (don’t submit your income tax returns to the IRS).
Others believe that you need a tax lawyer to handle your back taxes, but a tax expert like a CPA can help you file your taxes late.
IRS statute of limitations on unfiled tax returns
non filers letter IRS
If you are one of the millions of non filers and have old, unfiled federal income tax returns, it may be tempting to believe that the IRS or state tax agency has forgotten about you. However, you may still be on the hook 10 years later. If you don’t file and owe taxes, the IRS has no time limit on collecting taxes, penalties, and interest for each year you did not file. It’s only after you file your taxes that the IRS has a 10-year time limit to collect monies owed.
If You Do not File Voluntarily a Substitute Return can be Filed
If you fit the classification of non filers and you fail to file, the IRS may file a substitute return for you. The Internal Revenue Service utilizes income that has been reported to them, like wages, interest income, subcontractor payments, the sale of property, and so on.
The IRS then presumes you are single, have no dependents, and make use of the standard deduction. A Notice of Deficiency CP3219N (90-day letter) will be sent proposing a tax assessment.
You will have 90 days to file your past-due tax return or file a petition in Tax Court. If no action is taken on your part, the IRS will proceed with a proposed assessment. If the IRS files a substitute return, it is still in your best interest to file your own tax return to take advantage of any exemptions, credits, and deductions you are entitled to receive. The IRS will generally adjust your account to reflect the correct figures.
Collection and Enforcement Actions for Non Filers
The return the IRS prepares for you (proposed assessment) will lead to a tax bill, which, if unpaid, will trigger the collection process. This can include such actions as a levy on your wages or bank account or the filing of a notice of federal tax lien. If you repeatedly do not file, you could be subject to additional enforcement measures, such as additional penalties and/or criminal prosecution.
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How to file back taxes for multiple years
Here are three steps to follow:
- Gather prior-year documents. You'll need tax documents for the year you're filing your tax return for (e.g., you'll need your W-2, 1099s, or other documents from 2018 if you're filing your 2018 tax return). If you don't have those documents, you can request a tax transcript from the IRS for that year. Although you won't get exact photocopies of the documents, you'll get the information contained in those documents, which is what you'll need to get your return done.
- Use the right year's tax forms. Don't file a 2018 tax return using 2020 tax forms. Tax rules and tax forms are different every year.
- Don't be afraid to ask for help. Tax rules change every year, and you'll need to ensure you're applying the right rules to the right year. Good news: Many tax software packages allow you to file prior-year tax returns.
Understanding Unfiled Tax Returns
A taxpayer who has unfiled tax returns is called a non filer. The act of not filing one’s tax returns is a crime. You can possibly face imprisonment for a length of time proportional to each year of the unfiled tax return. While the IRS does not put a bulk of taxpayers in jail or monetary fines ($25,000 for individuals and $100,000 for corporations) for failing to file tax returns, it is not a valid excuse to make this mistake. Even if you have not received any notifications from the IRS, do note that they will catch up with you sooner or later.
Frequently Asked Federal Income Tax Return Questions
Generally, the IRS takes anywhere from 4 to 8 weeks to process a return that has been filed without any accompanying tax forms. For nonfilers, the wait time can be significantly longer, as the IRS will need to take additional time to determine your filing status and levy any applicable penalties. It's best to consult with a tax professional to find out how long the process will take in your specific case.
The statute of limitations on unfiled federal tax returns is three years. After that, the IRS can no longer prosecute you for not filing your taxes. However, they can still come after you for any unpaid taxes that you may owe. If you have not filed a return and it's been more than three years since the return was due, it's best to file as soon as possible to avoid any penalties or fines. The sooner you file, the sooner you can start resolving any potential problems with the IRS.
There are a few ways to file unfiled returns, depending on your specific situation. You can either file an extension and then file the returns later, or you can go ahead and file the returns without an extension but with all penalties for late return filing. There are also options for those who owe money on their taxes, such as payment plans or installment agreements.
To find out which option is best for you, it's best to speak with a tax professional. They will be able to help you understand your specific situation and give you advice on the best way to move forward.
There are a few ways to resolve unfiled tax returns. One option is to file an extension by the deadline in order to buy some more time to gather all of your information and complete your return. You can also submit a return for amended taxes if you find that you made mistakes on your original filing. And finally, if you owe money on your income tax liability, you can make arrangements to pay the IRS back over time. However, it's always best to consult with an accountant or tax specialist to find the best solution for your specific situation.