I have not filed my tax return(s), what do I do?

The quick answer to this question is that you must file your tax returns whether or not you can afford to pay the tax liability. Even if you have escaped detection for one or more years, your time may be running out and when it does the effects can be staggering. Relatively small tax liabilities can become excessive when penalties and interest are added to the assessed liability. Taxpayers who don’t file a past due return or contact the IRS are subject to the following:

  • Penalties and Interest will be assessed and will increase the amount of tax due.
  • The IRS will file a substitute return for you. But this return is based only on information the IRS has from other sources. Thus, if the IRS prepares this substitute return, it will not include any additional exemptions or expenses you may be entitled to and may overstate your real tax liability. (Even if the IRS has already filed a substitute return, it still makes sense for you to file your own return to make sure you take advantage of all the exemptions, credits, and deductions you are allowed. The IRS will generally adjust your account to reflect the correct figures.)
  • Once the tax is assessed the IRS will start the collection process, which can include placing a levy on wages or bank accounts or filing a federal tax lien against your property.
  • Generally, if a taxpayer is due a refund for withholding or estimated taxes paid, it must be claimed within 3 years of the return due date or risk losing the right to it. The same rule applies to a right to claim a tax credit such as the Earned Income Credit (EIC).
  • Self-employed persons who do not file a return will not receive credits toward Social Security retirement or disability benefits. Failure to file results in not reporting any self-employment income to the Social Security Administration

Fortunately, filing a past due return may not be as difficult as you think. Depending on an individual’s circumstances, a taxpayer filing late may qualify for a payment plan or may be eligible to make an “offer in compromise”.


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