Understanding the Law on Unfiled Tax Returns

Filing Unfiled Tax Returns with The Law Offices of Nick Nemeth

Filing your taxes on time is essential to avoid coming under the lens of the IRS. If you have failed to file taxes, say 5, 10, 15 years or longer, you are sitting on a huge tax debt and must address the issue by filing unfiled tax returns. While you can always find experienced tax attorneys at the Law Offices of Nick Nemeth to help you out in cases of unfiled tax returns, it is wise to understand the law for a better understanding of your current situation. To help clear some misunderstandings, we present to you an overview of the law on unfiled tax returns. Read on.

Consequences of Unfiled Tax Returns

Every year, the IRS requires you to submit your tax returns and failing to do so is a serious offense. There is a small yet a real possibility of having criminal charges filed against you for failing to file your taxes. If you evade filing and paying taxes despite being aware of your tax obligation, you can be held guilty of tax evasion—a serious criminal offense punishable by law. The other issue with failing to file tax returns is that the IRS will file those returns on your behalf. When that happens, you will be liable to pay a lot more than what you would originally have to pay. But there’s good news. If you get up-to-date with your old returns, the IRS has a policy that requires you to pay only for the past 6 years or a little further.

Penalties of Unfiled Tax Returns

You are required to pay an IRS ‘failure to file penalty’ that stands at 5% of the amount due on your unpaid taxes for each month or few months together where your taxes remain unfiled. On top of this, you are also liable to pay the ‘failure to pay penalty’ that stands at 0.5% per month of unpaid taxes and a minimum fine of at least $135 is levied. If you keep these penalties and calculate the tax debt keeping all the years of unfiled tax in mind, it piles up to be an enormous sum of amount you now owe to the IRS. The IRS can take as long as it wants to come after you and prosecute for unfiled returns. According to the IRS statute of limitations, the government has up to ten years to collect the debt on unfiled tax returns. Once you start repaying your unfiled returns from the past, you activate the statute of limitations and buy yourself enough time to pay back the tax debt and avoid charges.

Resolving Unfiled Taxes

Taxpayers can opt to settle all their unfiled tax returns with the help of the IRS Amnesty Unfiled Return Programs. As mentioned, when you calculate all your unfiled tax returns from the past, there may be a huge mountain of tax debt you might be sitting on. In such cases, the IRS gives you a number of options such as an Installment Plan, which depends on your eligibility to pay your tax debt. Another provision is an Offer in Compromise, wherein the IRS allows you to settle the outstanding debt from all the unfiled tax returns at an amount lower than what you actually owe. There are various other provisions through which you can bail yourself out of the problem.

If you do not have your previous year’s records or have lost them in an accident, forms such as the W-2s, 1099s, K-1s and so on are there for your rescue. You can reference your bank records and an IRS report known as the W&I Transcript is also helpful when you don’t have access to your previous records. If you have unfiled returns including foreign accounts, the IRS has created several disclosure programs to help you settle such matters.

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Wrap Up

If you have years of unfiled tax returns piling up, it’s highly advisable to to file as soon as possible to avoid heavy penalties, levies, and possible jail time. Filing returns on unpaid taxes and negotiating with the IRS agents, however, can be a confusing and a daunting task. That is when you need a trusted IRS tax attorney such as the Law Offices of Nick Nemeth. If you have unfiled tax returns, do not wait anymore. Reach out to us by filling our contact form or simply call (972) 627-4580.