Unfiled Returns (Back Taxes)

Whether you delay filing your tax return for a year or two or many years, it’s not worth it. Believe it or not, ten million people or more fail to file their tax returns each year! That’s incredible—who would have thought that, right? If you are a “nonfiler,” in addition to having to pay back taxes, you could be looking at civil and criminal penalties.

One thing that’s very real is that the IRS is becoming very good at finding nonfilers. So while the IRS may not have found you yet, if you have an unfiled tax return than sooner or later they will and they will want their unpaid back taxes. Understanding the need to file unfiled tax returns is crucial to avoid further penalties and legal issues.

What are the consequences of unfiled federal income tax returns and back taxes?

Failing to file tax returns and falling behind on paying taxes can lead to serious repercussions that negatively impact your financial well-being and legal standing. Here’s a breakdown of what you could face if you find yourself in this situation:

  1. Penalties and Interest
    When you don’t file your tax returns on time, the IRS can slap you with penalties. These penalties can add up quickly, amounting to 5% of the unpaid taxes for each month your return is late, with a maximum penalty of 25%. On top of that, you’ll also accrue interest on any unpaid taxes from the due date until you settle the balances owed. It’s crucial to file taxes promptly to avoid these penalties and interest, which can significantly increase your tax liability.
  2. Loss of refundsIf you’re owed tax refunds for any of the years you failed to file, you might forfeit that money if you don’t act within the IRS’s statute of limitations. This means you’re essentially leaving money on the table that rightfully belongs to you. The statute of limitations for claiming tax refunds is typically within three years from the original tax return due date, emphasizing the importance of timely filing to secure any refunds you’re entitled to.
  3. Legal action
    The IRS has the authority to take legal action to ensure you comply with tax laws. This might involve the IRS filing a substitute return on your behalf, which typically doesn’t consider any deductions or credits you might qualify for, potentially leaving you with a higher tax bill. They can also impose civil penalties, place liens on your property, or garnish your wages or bank accounts to collect unpaid taxes.
  4. Criminal charges
    In cases of deliberate tax evasion or fraud, you could face criminal charges. This can result in hefty fines and even imprisonment, so it’s crucial to take your tax obligations seriously.
  5. Impact on credit and financial standing
    Unfiled tax returns and back taxes can harm your creditworthiness. Lenders often require tax returns when assessing loan applications, so failing to file can hinder your ability to secure loans or credit. It may also affect your eligibility for certain professional licenses or certifications.
  6. Difficulty resolving tax issues
    Not filing tax returns can complicate efforts to resolve tax-related matters, such as audits or disputes with the IRS. It may also limit your options for negotiating payment arrangements or settlements.
  7. Loss of Social Security Benefits
    If you’re self-employed and fail to file tax returns, you may miss out on credits toward Social Security benefits, potentially impacting your future retirement income.

If you’re facing unfiled tax returns or back taxes, it’s essential to address the issue promptly. Consulting a tax professional can be of great help when handling the complexities of resolving unfiled tax returns and back taxes, and ensuring accurate filing and maximizing your chances of claiming applicable credits and deductions.

And if you are being pursued for these types of tax issues, you’ll probably get a call from the IRS Criminal Investigation Division. You need to know that they routinely make an example of a few people so the rest of the taxpaying public will take notice. Essentially they are trying to communicate “don’t do this – if you do, your life could be destroyed.” They are very successful in their efforts, but you do not have to get to this point.

Voluntary Disclosure Policy for Unpaid Tax Bill

The Voluntary Disclosure Policy is a program offered by the IRS that allows taxpayers to come forward voluntarily and disclose previously undisclosed income or assets. It is an opportunity for taxpayers to rectify their tax situation by submitting missing returns and potentially avoiding prosecution. This program is especially beneficial for those with unfiled tax returns, as it offers a chance to come clean and comply with tax laws. However, there are crucial requirements to consider:

  • Accuracy is key
    All unfiled tax returns submitted through the Voluntary Disclosure Program must be fully accurate. It’s important to use the correct tax forms when filing a federal income tax return through this program, as failure to do so can increase the risk of criminal prosecution.
  • Honest disclosure
    If you believe the Voluntary Disclosure Program is the right path for you, it’s essential to voluntarily inform the IRS of your failure to file and ensure that your income comes from legal sources.
  • Timely action
    To qualify for the program, you must file a correct tax return, make full payment, and disclose your noncompliance before becoming aware of any criminal investigation against you.

By adhering to these requirements and taking prompt action, taxpayers can leverage the Voluntary Disclosure Program to address unfiled tax returns and back taxes while minimizing the risk of legal repercussions. As a tax attorney, I can guide you through the voluntary disclosure process and help you navigate the requirements to achieve the best possible outcome.

Here’s what we can do for you…

At the law office of Steven N. Klitzner, we specialize in resolving tax issues and can provide comprehensive assistance to individuals with unfiled tax returns and back taxes. Here’s how we can help:

  • Evaluate your tax situation
    We will review your financial records, assess your tax liability, and ensure accurate filing by considering your self employment income and taxable income to determine the best course of action.
  • File past-due tax returns
    We will assist you in preparing and filing any unfiled tax returns to bring you into compliance with IRS requirements. Our team ensures that filed tax returns accurately report all income transcripts, mortgage interest paid, and premium tax credit. Additionally, we’ll help you obtain wage and income transcripts to verify income and deductions, ensuring a thorough and accurate tax filing process.
  • Negotiate with the IRS
    We will communicate with the IRS on your behalf to negotiate payment arrangements, settlements, or penalty abatement to help you resolve your tax debt.
  • Represent you in legal proceedings
    If necessary, we can represent you in audits, appeals, or other legal proceedings with the IRS to protect your rights and interests.

Don’t let unfiled tax returns and back taxes overwhelm you. With the help of a knowledgeable tax attorney, you can take proactive steps to address your tax issues and achieve peace of mind. Call us today at (305) 564-9199 for a free, confidential consultation and start resolving your tax concerns.

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