home loan finance blog
Send it in. If you have delinquent tax returns, the best advice is to send the tax return in to the U.S. Postal Service as soon as possible by certified mail with return receipt requested The IRS will send back a little receipt in the mail a few days later showing the date and time your returns were delivered to them and who signed for it. Thus, you will have proof that they received what you mailed. Regardless of why a tax return was not submitted on time: unprepared emotionally, procrastination, financially cant afford to pay taxes owed, it is still crucial to file a return. Not filing this year to avoid getting caught because you didnt send anything last year is not a good excuse either.
Un-filed returns will be discovered. The IRS has improved its database of income transactions, making it easier for them to identify the people who should be filing returns. The IRS specifically looks for people who have not filed returns and everyone who has a savings account, earns any type of income, or has previously filed returns has a record with the IRS.
What Will Inevitably Happen If You Dont File
- IRS will send a series of letters demanding payment.
- You can send your return or an appeal.
- If neither is received, the IRS will file a substitute return for you using the highest tax bracket.
- Additional exemptions or expenses you might be entitled to will not be included in the return the IRS files.
Why You Should File Anyway
- Claim additional items you may have missed out on when the IRS filed a return for you. When the return you filed is processed, your account will be changed to show the right figures.
- When purchasing a home or financing a business, copies of filed tax returns must be submitted to the lending institution.
- Copies of filed returns are needed for students trying to qualify for higher education loans or federal aid.
- Medicare, Social Security, disability, unemployment compensation, and industrial insurance are computed based on reported income.
- Not filing and getting caught includes consequences such as interest and penalties on the original tax bill, one year in jail, and a $25,000 fine ($100,000 for corporations).
Aside from the above benefits, its best to file a return because per the Statute of Limitations the IRS has no limit on when it can collect any outstanding balances but taxpayers are only allowed 3 years to claim a refund. After the 3 year period, the U.S. Treasury collects the unclaimed money and the person forfeits the refund.
The IRS, on the other hand, has 10 years once a return has been filed to collect the tax. The Statutes of Limitation does not start for the IRS until a return has been filed.
The IRS time period to collect the tax expires if the tax is not collected in the 10 year period and the statute of limitations is not extended. This rule can occur for people who seek out help and start paying their taxes.
Best Course Of Action Contact the IRS or a tax professional to get a solid payment plan set up. The IRS will usually limit investigations to the last 6 years for people who have several delinquent returns. If you cant pay all your taxes, still file and consult a tax professional for payment options that might be available.