Late Tax Returns

The IRS treats unfilled returns very seriously. Many taxpayers do not file IRS tax returns because they do not have the money to pay the balance due on the IRS tax return. Our tax attorneys strongly believe that in most circumstances, filing the missing IRS tax returns is in the best interest of the client. Although there are numerous reasons for timely filing of the IRS tax returns, the IRS can impose a penalty of up to 25% of the tax due on a late tax return.

We represent numerous clients who have missed filing some of their state or federal taxes. Some clients are only behind a year or two, others need to catch up on their filings way back into the 1980's. Regardless of complexity, our team of experienced tax experts promptly prepares accurate returns, while aiming to minimizing the risk of IRS criminal prosecution and enforced IRS tax collections.

Due to circumstances beyond their control, many of our clients have lost their tax records, making the preparation of old tax returns more complicated. Our tax experts often reconstruct and retrace client's tax records. By working closely with the clients, our tax experts are able to prepare reasonably accurate tax returns going back as far as 15 to 20 years.

Below are some of the most frequently asked questions regarding delinquent taxes:

File All Tax Returns

File all returns that are due regardless of whether or not you have the ability to fully pay the amount due with the return. You may qualify for an alternative payment plan, but all alternative payment options require continued compliance with all filing requirements.

Truths About Filing Your Late Tax Return with the IRS

Failure to file, or a delay in filing a return can be costly - if you owe taxes, a delay in filing may result in penalty and interest charges that could increase your tax bill by 25%, or more
There is no penalty for failure to file if you are due a refund. But if you wait too long to file, you may risk losing the refund altogether. The deadline for claiming refunds is three years after the return due date.
Individuals who are entitled to the Earned Income Tax Credit must file their return to claim the credit even if they are not otherwise required to file.
Self-employed individuals must file their returns (reporting their self-employment income) within three years of the due date of the return in order to receive Social Security credits toward their retirement.

Non-filers that do not respond to the Service's request for a return may be considered for enforcement actions. Continued non-compliance of flagrant and/or repeat non-filers could result in additional penalties and/or criminal prosecution.

What Information Do I Need To File Late Taxes?

You should bring any information relating to your income and deductions for the years you need to file. Some of the documents include:

Forms W-2 - These are the forms you receive each year from your employers showing your wages.
Forms 1099 - These are forms you receive from banks and other financial institutions showing your interest and dividends. Form 1099s also report self-employment income.
Information on expenses your want to claim on your return, such as itemized deductions, child care expenses or business expenses.
Social Security Numbers for your children age one or older and any other person whom you claim as a dependent.
A copy of the last tax return you filed.

Why Should I File My Tax Return as Soon as Possible?

There are two advantages to filing as soon as possible:

Generally, if you are due a refund for withholding or estimated taxes paid, you must claim it within 3 years or you may lose your right to it. The same rule applies to your right to claim a tax credit such as the Earned Income Credit (EIC).
If you are self-employed and do not file a return, you will not receive credits toward Social Security retirement or disability benefits. If you do not file, IRS cannot report your self-employment income to the Social Security Administration

Will I Pay Interest and Penalties For Late Taxes?

Interest and penalties do not apply to years in which you are entitled to a refund. About a third of those who file returns for past years discover they have a refund coming.

Interest and penalties do apply to years in which you owe money. The interest charged on late payments changes quarterly. During the last several years the interest rate has ranged from a high of 9 percent to a low of 7 percent.

The penalty for filing late is generally not more than 25 percent of the amount owed. The penalty for paying late is 1/2 of 1 percent per month, up to 25 percent of the amount due.

IRS recognizes many people drop out of the system because of personal problems, including serious illness, a death in the family, or loss of financial records in a natural disaster. Tell us why you haven't filed. Depending on your situation, IRS may waive some of the penalties.

What If I Owe More Than I Can Pay To The IRS?

Even if you don't have enough money to pay, you should file your return to avoid further penalties for failure to file. The IRS will work with you to find a solution to your problem.

The IRS has streamlined its policies for various collection procedures to offer alternatives for resolving your account if you cannot pay in full with your return:

The IRS will work with you to set up an installment payment agreement when the situation warrants. Installment payments allow you to pay your debt over time.
Another way IRS will work with you is to discuss if an offer in compromise is an appropriate solution.

What If I Don't File My Late Taxes Voluntarily?

IRS is taking enforcement steps for those who repeatedly choose not to comply with the law. IRS Revenue Agents will prepare returns when taxpayers do not file. The returns IRS prepares might not give you credit for deductions and exemptions that you may be entitled to receive. IRS will send bills to those taxpayers for the tax due, plus interest and penalties.

People who repeatedly don't comply with the law are subject to additional enforcement measures.

How Can I Avoid Owing Money on Next Year's Return?

Many people don't file tax returns because they don't have enough money to pay the tax they owe. They find out on the tax day that their withholding or estimate payments do not equal their tax bill.

IRS can help you avoid this situation by telling you how to ask your employer to withhold enough tax from your pay. If you have income that is not subject to withholding, IRS can give you the information you need to make quarterly payments to cover the amount you will owe.

Changes in your financial circumstances may have an impact on your taxes. For example, if your income goes up, you get divorced, or you sell an asset, you may need to adjust your withholding or estimated payments.

If you take these steps, you will be better able to meet your tax obligations and avoid tax day surprises

Will I Go To Jail?

IRS' long-standing practice has been not to recommend criminal prosecution of individuals for failure to file tax returns- provided they voluntarily file, or make arrangements to file, before being notified they are under criminal investigation. The taxpayer must make an honest effort to file a correct return and have income from legal sources. A letter from your IRS Service Center concerning your taxes is not a notice that you are under criminal investigation.

IRS' effort to get people back into the system is part of a long-term plan to improve tax compliance. IRS wants to get people back into the system, not prosecute ordinary people who made a mistake. However, IRS will continue to investigate flagrant cases involving criminal violations of tax laws.

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Late Tax Returns Filing