Unfiled Tax Returns
In the best situation, you would file your tax return and pay any taxes you owe. The second best situation is to file your return without paying the taxes due, knowing that if you can pay promptly, as soon as you’re able, you might avoid substantial penalties and interest. Still, many taxpayers fail to file returns at all for several different reasons.
Reasons Taxpayers Give for Not Filing. People give various reasons for not filing their tax returns. Sometimes, they don’t understand that a return is due. Other times, they may believe that a spouse, business manager, or other person has filed the return, and it turned out that no one filed. Other times, though, the person knows a tax return is due but is ill, injured, depressed, distracted by a crisis, or even just fearful that filing a return will bring more bad news. Unfortunately, the IRS isn’t especially interested in or sympathetic to the reasons.
What Happens When I Don’t File a Return? Several things can happen when you don’t file a tax return, and as you can imagine, none of those things are good. First, whatever taxes you would have owed with a return, you still owe without one. Second, penalties and interest begin to accrue on the unpaid taxes. Third, you will at some point (and sooner is better than later) still need to file a return, and it will likely only get more problematic from a records standpoint the longer you wait.
A Substitute Return. However, another thing that may happen could be worse than any of the above consequences of failing to file — the IRS or state tax authorities could file a substitute return for you. While that may sound like not such a bad thing, when IRS agents use employer or other records to file a substitute return, they don’t claim the allowable exemptions and deductions that you would have lawfully claimed. In other words, you very likely end up owing much more in taxes than you would have owed if you had filed your own return.
A Risk of Criminal Penalties. With their notices, liens, and levies, the IRS and state tax authorities can be pretty convincing to get you to file unfiled returns. One more way they do so is to threaten and, in some cases, pursue criminal penalties, especially when evidence exists that your failure to file returns was part of a scheme to defraud the government of taxes. The IRS regularly reports its enforcement actions resulting in prison sentences for fraud relating to the failure to file tax returns.
The Role of Counsel. If you had a tax lawyer to advise you when your return was due, you probably would not be in the situation you’re in now. But it’s not too late to take advantage of the expertise of a tax lawyer. The IRS Help Attorneys at The Law Office of Beverly Winstead, LLC can help you file unfiled returns while strategizing how you can pay any unpaid taxes. If the IRS or state tax authorities have already filed a substitute return or non-filer assessment, then the IRS Help Attorneys may be able to help you through a process that the IRS calls audit reconsideration that could lead to an installment agreement or offer in compromise.
The National Bar Association recently recognized founding and managing attorney Beverly Winstead as one of its Top 40 Under 40 lawyers in the country for the broad impact of her legal expertise, teaching, government service, clinic directing, and charitable works. You can trust our team to vigorously pursue your best interests. Don’t delay any longer. Time may be running out. Call The Law Office of Beverly Winstead, LLC now at (301) 306-1234 or contact the firm online.