- If you have income, you should be filing a tax return
Not filing your tax returns is not just bad financial planning, it can be deemed a criminal act by the IRS. It is punishable by a year in jail and a $10,000 fine for each tax return that is not filed. Sure, you may think you’re getting away with not reporting your income, but think about. Chances are whoever you work for, or are doing business with is most likely reporting the money they give you as a business expense to the IRS. In fact, they usually let you of the amount they reported to the IRS in the form of a 1099 or W-2. Sometimes taxpayers don’t file because they no longer have income records for the delinquent tax years. If this is case, the feel free to call 773-609-4TAX or visit http://www.truetaxresolutions.com for a free no obligation consultation with licensed tax professional and we can go over your options for obtaining the financial records necessary to file your tax returns up to date.
- Avoid extra penalties
When you do not file a tax return on time, you automatically open yourself up to additional penalties. A few of the penalties I most commonly see with clients who have not filed tax returns tax returns are late filing penalties, late payment penalties, and penalties for not pre-paying taxes. Bear in mind the penalty for not filing your tax return is 25%, and when you start tacking on additional penalties and interest you have the makings of a sizable tax debt. If you work or are in business for yourself I recommend you always file a tax return on time, even if you don’t have the cash on hand to pay the tax debt in full. When you file on time you will at least avoid the late filing penalty.
- Do not let the IRS file your taxes for you
You may not be aware of this but if you do not file a tax return the IRS will sometimes file one on your behalf. This process is known as Substitute for Return. Although it may seem nice of them to file your tax return for you, please be advised they usually only do it to start the collections process. The reasoning behind this is since you did not file a tax return, there is technically no balance yet and therefore nothing for the IRS to collect on. So, by them filing the tax return for you, they create and balance that they can then collect on. There are several disadvantages to having the IRS file your taxes for you namely is that they do not consider such credits as the earned income credit, business expenses, marital status, and dependents among others. This often results in a higher amount owed in taxes.
- You may be owed tax refunds
If you are a W-2 employee who has taxes withheld from your paycheck or a self-employed person who makes quarterly estimated tax payments, there is a chance you paid more taxes than you owe. If this is the case and you don’t file a tax return you are just leaving money on the table. Even if you have not filed a tax return in years you can recover tax refunds for up to three years back. If you are due tax refunds I recommend you visit http://www.truetaxresolutions.com or call 773-609-4TAX to get them filed as soon as possible.
- Compliance is key
Filing any missing tax returns is usually the first step in fixing a tax problem The IRS and most states require all missing tax returns before they will consider entering an installment agreement or a tax debt settlement. Therefore, unless you a very low income, or only receive social security income you need to be filed up to date to enter any tax debt relief programs. If you need to file delinquent tax returns I recommend you don’t put it off any longer, in most cases ignoring a tax problem just leads to more penalties and interest.
Harold Pena-Hayes, E.A.
President of True Tax Resolution Inc.