Tax Help Tip-Avoid the Delinquent Tax Return Trap

Countdown to tax day: 13 days

A few weeks ago, I had the pleasure of sharing tax relief tips on Midday Sunday Fox 11 with host Tony Valdez. A topic we covered was unfiled or delinquent tax returns. We deal with a lot of non-filers at our firm; the average client has between four to eleven years of unfiled tax returns and while almost all are good people, they usually have experienced a life-altering event that has thrown their lives into chaos leaving financial devastation in its wake.

Life-changing events happen such as death, serious illness of a loved one, drug and alcohol addiction, gambling, loss of a job or bipolar disorder, and filing taxes gets put on the back burner and avoided. This is, quite simply, one of the worst mistakes a taxpayer can make! One year leads to another and the IRS (usually around year three of non-filing and unreturned correspondence) catches up with delinquent filers often extracting funds from their accounts to pay off the entire tax debt.

To those tax stressed consumers who owe back taxes but don’t intend on filing for whatever reason, here are five points you need to be aware of:

  • Failure to file tax returns is a misdemeanor that is punishable by up to $10,000 per year and one year in jail. The IRS is aggressively going after non-filers such as actor Wesley Snipes who is currently serving three years for not filing three years’ worth of returns.
  • The IRS is only obligated to send notices to the last known address, so if you moved since last filing, you may not know the IRS is trying to reach you.
  • The IRS will not consider a tax settlement or payment plan or Offer in Compromise to settle your back taxes until you have filed all legally required tax returns.
  • Didn’t have the funds so didn’t file? No problem. The IRS will file a “SFR” (Substitute for Return) on your behalf. SFR’s are prepared with the government’s interests in mind. Meaning the IRS will overstate what taxes, penalties and interest you owe and take only one standard deductions and one personal exemption. No credit for deductions you may be entitled to.
  • Exceptions to filing tax returns: if your income is below $9,500-$9,600, you do not have to file because you won’t owe any taxes. However, if income tax was withheld so that you have money due, it pays to file so you can redeem the refund.

Regardless of what you may have heard, you have the right to file your original tax return, no matter how late it’s filed. Given the consequences for not doing so, it’s important you file or have a tax resolution expert prepare your latest tax return, and any prior delinquent unfiled tax returns as soon as possible to state what you truly owe, and avoid significant long-term tax problems down the road.

More Tax Help, IRS News and Tax Relief Tips:

  1. Ask the Certified Tax Specialist – Small Business Back Taxes
  2. Delinquent and Unfiled Tax Returns? 8 Steps to Resolving Them
  3. Tax Resolution Services Offers Returning Veterans Free Tax Advice
  4. Tax Expert Gives Tax Filing Info on Fox News
  5. New Offer in Compromise Policies Bring Tax Relief

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