What Happens If You Have Unfiled Tax Returns
When you have delinquent returns, the amount you owe can go up significantly with the addition of penalties and interest to the tax balance. You could end up with a much bigger tax problem than you started with.
If you do not file, the IRS will file a tax return for you. The reason they do this is that it creates a tax bill for the tax year in question, and then they take steps to enforce the payment of that tax bill. The tax return that they prepare is known as a substitute income tax return (“SFR”). Once they prepare the tax return, they share it with the state in which you live so that the state can also create a tax bill and start collection activity (liens, levies, etc.). Of course, when these income tax returns are prepared, they do not have all the information you have, so the tax returns are incorrect, since they may be missing the fact that you’re married, or that you have kids, or other necessary information.
The substitute return is based on information reported to the IRS from employers and financial institutions, but it does not include tax credits, deductions, or expenses. Substitute returns overstate tax liabilities, and the IRS will expect a larger tax payment than what you most likely would have to pay if your tax return was prepared properly.
Penalties and Interest on Unfiled Tax Returns
Here are penalties you could face if you fail to file your tax returns:
- Failure to File Penalty: If you fail to file, the IRS will calculate a penalty of 5% of your unpaid taxes for each month. The penalty of not filing tax will not exceed 25% of your unpaid taxes.
- Failure to Pay Penalty: If you have pending money owed on an unfiled tax return, the IRS can apply a penalty of 0.5% of the unpaid taxes for each month or part of a month the tax remains unpaid. The maximum forfeit the IRS will assess is 25% of the tax amount that remains unpaid. It begins from the time the return was outstanding until it is paid off.
- Criminal Penalties: The IRS could possibly hold you to account for tax evasion. There could be a disciplinary action against you, depending on the severity of the situation.
You can see the financial and legal problems that having unfiled taxes creates. If you are in this situation, there are solutions. Get help today from our unfiled tax returns lawyer.
What to Do If You Haven’t Filed Taxes
The initial steps to resolve the issue of unfiled back tax returns are relatively easy. First, you will need to provide our unfiled tax returns lawyer Timothy S. Hart with your income and expense information, as well as any other documentation that is required to complete the tax returns in an accurate manner. Having the assistance of our tax lawyer, who is also a Certified Public Accountant, is helpful since there may be legitimate shortcuts to produce an accurate tax return.
In many cases, people who owe back taxes do not have all the tax data needed to complete the unfiled back tax returns. Our tax attorney has extensive experience with this type of situation and can handle getting the information for you. We will request the information from the IRS and other sources to prepare an accurate tax return. In addition to gathering the W2 or Form 1099 data if you are self-employed, we analyze whether you are entitled to any credits or tax deductions that will help lower your tax bill.
Once the overdue tax returns are prepared, you will review them, and then we will submit the unfiled back tax returns to the IRS or state on your behalf. We will then handle all aspects of the negotiations to resolve the tax debt.
Options for Resolving Tax Debt
If you have tax debt, there are options for resolving it without having to pay your entire back taxes at one time. You may be eligible for one of the following:
- Installment Plan: If you owe money once you file your past-due returns, you can request an installment plan. If you meet the requirements, an installment plan will give you an opportunity to pay your taxes over a scheduled period of time.
- Offer-In-Compromise: With the help of your attorney, you may be able to negotiate an offer-in-compromise (OIC) tax settlement. An OIC allows you to pay less than the full amount of taxes you owe. According to the IRS, an OIC may be approved “when the amount offered represents the most we can expect to collect within a reasonable period of time.”
- Currently Not Collectible Status: If you can substantiate that you are going through financial hardship, the IRS will temporarily terminate collection actions until your financial situation changes. However, while you are currently not collectible, interest and penalties will still continue to increase, and any tax refunds will taken by the IRS.
Our Tax Attorney Negotiates Tax Debt Resolutions with the IRS
Many people have the general perception that there is no room for negotiating with the IRS. This is not true. While IRS tax agents may not make negotiating with taxpayers easy, they do have the power to negotiate. This is where an attorney who understands the tax laws fits in. Attorney Timothy S. Hart knows the parameters of negotiating powers given to IRS agents.
Attorney and CPA, Timothy S. Hart has worked up close and personally with many, many clients grappling with massive tax problems. He understands the stress, anxiety, and uncertainty a person feels when they get that letter or phone call from the IRS or New York Department of Taxation and Finance demanding payment of overdue taxes. With a skilled attorney at your side, you can take a deep breath, create a strategy, and find a way through to the other side. Consider these successes:
An Affordable Payment Plans
We represented a business owner before the New York State Department of Taxation because of a sales tax criminal investigation of his business. We were able to negotiate a payment plan of $1,500 a month to pay off the over $500,000.00 in sales taxes owed, with no criminal charges being filed. We represented an individual client and convinced the IRS to accept a monthly payment plan of $1,500 for their $810,800 tax debt, even though she owned a valuable real estate partnership interest. Lastly, for a client that owes the IRS $2,312,145, we were able to convince the IRS to accept a $3,163 monthly payment plan to pay off the tax debt.
Settlements with the IRS
Our tax law firm negotiates aggressively in a solution-focused manner to achieve account settlements with the IRS that are manageable. One of our clients, Jeff K. owed the IRS $1.789 million, and our tax problem lawyers were able to strike an agreement in which he could settle the debt by paying just over $351,000. Another client, Marino F. owed $189,100 in civil penalties related to unpaid payroll taxes and income taxes, and they settled for $79,273. Another elderly client, John M. whose wife had passed away found out that she did not pay the taxes owed on her income when they filed their joint income tax return. We were able to reduce the $128,466 IRS assessment to zero through filing an innocent spouse claim. With the same client, we were able to settle his Ohio tax debt of $10,700 for only $221. We have also been successful in having the IRS remove penalties assessed in numerous cases.
Settlements with the New York Department of Taxation
Our law firm has had tremendous success in negotiating on behalf of clients with the New York State Tax Department to settle old tax debts for a fraction of the amount due by utilizing their offer in compromise program. One client, Karen P. owed $430,000 in payroll taxes, and she settled the account for $70,000. Another client, Misha A. owed over $100,000 in unpaid sales tax from a failed business, and we were able to settle for $49,000 payable over 60 months. For another business client, Nite M. owed $850,000 in sales taxes and was able to settle the account for less than half that amount ($323,000 paid over 5 years) even though they are still in business and profitable. Lastly, in the case of another client, while married our client had a joint income tax debt of over $57,000. We convinced the New York State Tax Department she was an innocent spouse and lowered her liability to zero. Needless to say, these clients were pleased with these outcomes.
When it comes to tax law, it’s all about understanding the technicalities and finding ways to achieve solutions that clients can manage. Most clients want a resolution so they can move forward with their life, with less anxiety, but they’re scared and confused because the law is complicated and tax institutions can be intimidating. Our law firm will walk beside you every step of the way, providing reassurance, communication, guidance, and tangible solutions.
IRS Voluntary Compliance Program for Unfiled Tax Returns
In many instances, when a taxpayer seeks to correct the problem of unfiled back tax returns before the IRS begins a criminal investigation, it is possible to utilize the IRS “voluntary disclosure” policy to file the returns and avoid prosecution. New York State has a similar disclosure program. When using these programs, the taxpayer and his or her tax representative must be very careful to file returns that are accurate and complete. If the IRS (or state) determines that a return filed late is inaccurate or incomplete, the chances of triggering a criminal investigation greatly increase.
The IRS voluntary disclosure policy applies to a taxpayer who:
- Voluntarily informs the IRS of his or her failure to file for one or more years.
- Makes the disclosure prior to being informed that he or she is under criminal investigation.
- Files a correct tax return or cooperates with the IRS in ascertaining his or her correct tax liability.
- Makes full payment of the amount of the taxes due or, if unable to do so, makes an agreement to pay the taxes owed over time.
To ensure that your tax returns are accurate and complete, you should engage the services of a skilled unfiled tax returns attorney. Timothy S. Hart has extensive experience in both tax law and as a Certified Public Accountant.
Do not risk triggering a criminal investigation by the IRS or state. Contact our law firm today for a free consultation by calling our Albany office at (518) 213-3445 or our NYC office at (917) 382-5142.
Unfiled Tax Return FAQs
If you have unfiled tax returns, you probably have many questions about your rights and responsibilities. Following are some common questions that we get about unfiled returns. For answers to questions based upon your particular situation, contact our unfiled tax returns attorney to arrange a free consultation.
You should recognize that the problem of your unfiled taxes will not go away and take the initiative to begin resolving the problem. If you do not and the IRS begins an investigation, you could face criminal charges. It is smart to start addressing the problem with the help of an experienced tax attorney. We will complete your unfiled returns to make sure they are accurate and file them with the IRS and the state. We will communicate with tax agencies for you. Our tax lawyer will negotiate with the IRS to arrange a workable solution for you to be able to meet your back tax obligation.
There is a general 10-year statute of limitations for collecting on an unpaid return. But the clock begins running when the IRS determines that you owe taxes and files a return for you or takes other action, or when you file the return, not when you miss the deadline for filing for that tax year. However, if your period of non-filing is longer than six years, we can often negotiate a resolution requiring that only the last six years’ returns need to be filed.
You resolve unfiled tax returns by facing the problem head on, not by ignoring it. To start the process, gather all the documentation and data you have available for the year or years you have not filed. If you are missing information, our unfiled tax returns attorney can assist you in collecting it. Usually, if you voluntarily file your past-due returns, our attorney will be able to negotiate a payment plan over time or an offer-in-compromise that reduces your taxes owed.
When you have many years of unfiled taxes, the financial and legal implications grow more complex. If you owed taxes on some or all of those years, you will now probably owe a large amount more because of penalties and interest. You might also be facing a criminal investigation if you have let your tax filings lapse for many years. When you have years of unfiled taxes, get assistance from an attorney who will help file your returns, including collecting lost and forgotten filing information, and work to negotiate a solution for paying your taxes.
If you are prosecuted for tax evasion, which includes intentionally avoiding paying taxes by not filing your returns, you could go to jail if found guilty. If you have discovered that the government is investigating you for not filing your returns, get legal help right away. Even if you are not being investigated but have unfiled returns, reach out to our attorney. If your problem is handled incorrectly, the chance of a criminal prosecution investigation or other enforced collection activity increases substantially. Attorney Timothy S. Hart provides free consultations.
The IRS pays out refunds to taxpayers every year. There are some instances in which taxpayers who neglected to file their returns for various reasons are owed refunds. However, in order to get a refund for over-paying on taxes, you first have to file your return. Though it is impossible to predict whether you will owe an amount or get a refund on your return, you must prepare and file to be certain. You may be entitled to tax credits and deductions that could help reduce your taxes. Taxpayers have the right to refunds for previously unfiled tax returns as long as they file within the three-year statute of limitations from the date the return was due.
You can see that if you fail to file your tax returns, there could be several negative effects. You could pay a lot more money to the IRS by not filing on time once penalties and interest are factored in. Besides the financial impacts, you could also expose yourself to criminal prosecution. And if you neglected to file and were owed money, you could forfeit your tax refund. Do not let the problem of unfiled tax returns linger any longer. Turn to Timothy S. Hart for assistance today.
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How Our Unfiled Tax Returns Lawyer Can Help You
Having the help of our tax attorney can benefit you in many ways when you have unfiled returns. Timothy S. Hart can reduce your stress when you receive tax-related legal notices, as with his long history of dealing with the IRS, he knows how to respond. Our attorney can recognize whether the IRS may have misinterpreted your tax situation and will work to explain the facts to tax authorities. Here are some other ways that our unfiled tax returns lawyer can help you, depending on your circumstances:
- Answer your questions and reduce your fears about filing
- Communicate with IRS officials on your behalf
- File a petition with the tax court
- Gather the data needed to fill out years of unfiled returns
- Negotiate a payment plan or reduced tax owed.
Our attorney will provide sound guidance and effective advocacy when you have unfiled returns. Timothy S. Hart provides free consultations as a first step in helping people put their tax problems behind them.
Who Needs Unfiled Tax Return Help?
Some examples of the types of clients who come to us for help include:
- Self-employed people who, due to financial difficulties, were not able to make their estimated tax payments during the year. When April rolled around, they did not have the money to pay the taxes, so they decided not to file. While this is an understandable situation, it can create serious problems with the IRS or state.
- Employees who modify their income tax withholdings to be very low, and then do not file their annual income tax returns. Obviously, when the IRS finds out about this, they force these taxpayers to have the correct income tax withholding taken out of their pay.
- Individuals who are procrastinators and just do not get around to filing their income tax returns, or people who have had traumatic events in their lives (perhaps a death or divorce) that have caused them to fall behind.
These are common examples of people who neglect to file taxes, but anyone who was required to file tax returns and has not will benefit from legal help. When wondering what to do about unfiled taxes, your first step is to contact a tax attorney who can help you complete and file your back taxes and negotiate a payment solution with the IRS or state.