Filing Unfiled Returns and Replacing Substitute for Returns
Filing unfiled returns and replacing substitute for returns
Every year, tens of thousands of taxpayers fail to file required tax returns. The act of not filing usually contributes to more significant problems with the passing of time.
While there are many reasons why a taxpayer has not filed a tax return, you need to aware of the following:
- Failure to file tax returns may be construed as a criminal act by the IRS.
- This type of criminal act is punishable by one year in jail for each year not filed.
- Needless to say, it’s one thing to owe the IRS money, but another thing to potentially lose your freedom for failure to file a tax return.
- The IRS may file “SFR” (Substitute For Return) Tax Returns for you. This is the IRS’s version of an unfiled tax return.
- Because SFR returns are filed in the best interest of the government, the only deductions you’ll see are standard deductions and one personal exemption.
- You will not get credit for deductions which you may be entitled to such as exemptions for spouses, children, interest and taxes on your home, cost of any stock or real estate sales, and business expenses, etc.
Regardless of what you have heard, you have the right to file your original tax return, no matter how late it’s filed.
When resolving a tax problem, it is relatively common to find that the taxpayer has back tax returns which have not been filed. There are three reasons why it is necessary to file the required back tax returns and get the taxpayer ‘Current’:
- Failure to file tax returns may be construed as a criminal act by the IRS and can be punishable by one year in jail for each year not filed. Filing unfiled returns brings the taxpayer ‘Current’
- Filing unfiled returns to replace Substitute for Returns may lower the tax liability owed and the associated interest and penalties
- A settlement cannot be negotiated with the IRS until the taxpayer becomes current
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