Need to know about unfiled tax returns
  • October 5, 2023
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Most people will agree that there are few things quite as scary as getting into trouble with the IRS. Many taxpayers get into trouble for committing simple and avoidable mistakes on their tax returns. With some care and the right knowledge, you can avoid making mistakes on your tax returns that can come back to haunt you in the future. In today’s post, we’ll present guidelines to help with your tax returns.

1. When Possible, File Electronically

To guarantee the highest level of accuracy on your return, it is recommended to file electronically. The system used for filing online can significantly reduce the number of mistakes committed in mailed returns. It can screen your tax return for errors and send it back as a rejection in the event any are found. You can then correct the return and file it again. Filing electronically helps eliminate mistakes and processing delays.

2. Enclose Payment For Owed Tax

If you owe taxes and plan to mail your return, you must enclose a check or money order and Form 1040-V Payment Voucher. The payment must be made to the “United States Treasury” and include your name, address, taxpayer identification number, daytime telephone number, tax form, and the tax year for which the payment is being made. When filing electronically, you can pay with your bank account using the Electronic Funds Withdrawal option. The IRS recommends electronic direct payment over other payment methods.

3. Attach All Necessary Paperwork To Your Return

Several forms and schedules need to be attached to your tax return in order for it to be considered complete. You’ll need to attach a Form W-2 from each of your employers to your return. If you have several jobs, make sure to compile the information from all the forms into a single return. For federal tax withholding, you’ll need to attach Form 1099-R. If you have any gambling winnings, you’ll need to report them by attaching form W-2G.

Additionally, for investments, you must attach Form 2439 for undistributed long-term capital gains.
Once you’ve gathered the necessary forms, attach them in the right order by placing any schedules and forms behind your Form 1040/1040A in the order of the “Attachment Sequence No.” shown in the upper-right corner of the forms.

Related Blog: Worried about IRS Problems? The IRS Fresh Start Program May Help

4. Make A Copy Of Your Return And Schedules

After you have completed your tax return, make a copy. Ideally, you should also make copies of all the paperwork used in preparing and filling out your return, including additional forms and interest statements. Safely store all such documents with the rest of your personal records. Later on, you can use this information, such as when you need to file an amended return, apply for a loan, or provide proof of your income.

Consequences of Unfiled Tax Returns

Most taxpayers are unaware of the fact that unfiled tax returns have more severe consequences than failing to pay their taxes. According to Forbes, about five percent of the population in the United States of America fails to file their tax return. Late or unfiled tax returns constitute a serious issue that can come back to haunt taxpayers and hit them with heavy interest and penalties. Whether you are entitled to a tax refund or owe the IRS years of unfiled tax returns, you must consult an experienced tax relief attorney who can help you file unfiled tax returns and save you from punitive measures. Let’s look at five possible consequences of unfiled tax returns.

  • You may Have to Pay Penalties

  • The IRS can impose heavy penalties on taxpayers who fail to pay their tax returns. If they file their tax returns 60 days after the due date, the IRS can charge a maximum penalty of up to 25 percent of the outstanding amount. Taxpayers may file for an extension, but they may have to pay late payment penalties that accrue at a rate of a half percent of the unpaid taxes per month and up to a maximum of 25 percent. If the failure to pay taxes is determined to be fraudulent, the IRS, under IRC 6651(f), can increase penalties up to a maximum of 75 percent of the unpaid tax.

    Related Blog: Answering Commonly Asked Questions about IRS Penalty Abatement

  • The IRS may Prepare Your tax Return

  • Every year, the IRS receives income information from third parties using Form 1099 and Form W-2. Based on this information, the IRS can prepare tax returns for people who have failed to pay their taxes and can exempt them from credits, exemptions, and deductions to which they might otherwise be entitled.

  • You Could be Charged with a Felony

  • Not filing or failing to file a tax return can be considered a federal crime under IRC 7203. When taxpayers willfully neglect to pay their taxes, they may be charged with criminal tax violations and can be punished severely with jail time and fines.

  • The Statute of Limitations Remains on Hold

  • The IRS generally takes three years from filing a return to audit it and propose an assessment. After the return is assessed, the IRS has 10 years from the date of that assessment to collect the outstanding tax bill. Although these timelines can be extended under special circumstances, these periods of limitation do not start until taxpayers file the returns or the IRS does it on their behalf. As a result, the IRS gets authorization to collect and assess the tax after many years.

  • You Could be Exempted From Getting Tax Refunds

  • Generally, taxpayers are not penalized for filing late tax returns when they are entitled to a refund. But, they have only three years from the due date to pay taxes and claim any refund. After three years, the unclaimed refunds will automatically be turned over to the government. Further, if taxpayers file their returns late, they may have to pay penalties.

If you have unfiled tax returns or owe money to the IRS, it is important to consult an experienced tax settlement attorney to chart the best way forward. 

An Overview Of Extensions 

Filing a late tax return and paying your taxes after the deadline both call for penalties; however, there are various conditions under which the IRS will not penalize you. If you are due for a refund but fail to file your tax returns on time, the IRS will not penalize you for not filing your tax return. What many taxpayers are unaware of is that there are several actions they can take to avoid an unfiled tax return penalty. One of the steps is requesting an extension, which around six million taxpayers do every year. In this section, let us learn about extensions.

  • Requesting an Extension

Taxpayers who fail to file their tax returns by April 15 can apply for an extension of six months and avoid penalties on the unfiled taxes. To apply for an extension, you need to complete Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, and submit it to the IRS by April 15. If the IRS grants you an extension, you will have until October 15 to file your taxes.

  • Failing to file an extension

The IRS may penalize any individual who owes taxes and does not file for an extension with a 5 percent penalty of the total taxes they owe the central tax authority. This amount accrues every month, but does not exceed 25 percent of the taxpayer’s total taxes.

Bottom Line

When looking for help with your unfiled taxes, contact Nick Nemeth’s office for experienced tax lawyers in Dallas-Fort Worth, Texas. Our tax law experts advise hundreds of Dallas-Fort Worth taxpayers, helping them resolve all types of IRS tax problems and prevent mistakes on their tax returns. For more information on our services or to schedule a consultation, call (972) 426-2991 or write to us here.

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