Unfiled Tax Returns

Unfiled Tax Returns Related Information:

Any person who has any income, whether from a job, self employment, interest income, dividends, rent income, etc. has to file a tax return. Organizations also need to file their company tax returns, individual tax returns, as well as payroll tax returns. Filing of these returns lets you know what you have to pay the IRS in taxes or what is owed to you by the IRS in refunds. Failure to do so results in un-filed tax returns, which is a criminal offense and can lead to criminal as well as civil penalties.

Common Reasons for Unfiled Tax Returns

Usually un-filed returns are a result of:

• People not aware that they come in the tax bracket and need to file tax returns.
• Taxpayers not having enough money to pay tax and hence they do not file the returns.
• Not knowing how to file returns.
• Misplaced records and data that cause un-filed tax returns.

Whatever the reason for not filing your tax returns, it can prove to be very costly to a taxpayer. If you do not file your own tax returns, then the IRS will do it for you with the information that they possess about your previous tax returns.

When the IRS files your tax return, they will definitely not have your best interests in mind and will put you in the highest possible tax bracket thus increasing the amount of taxes that you owe them. Thus it is very necessary that you file all your un-filed tax returns.

Benefits of Filing Unfiled Tax Returns

There are a lot of reasons to file your un-filed tax returns, such as:

• Normally, if you are entitled to a refund on taxes due to excess withholding by your employer or excess advance taxes paid by you to the IRS, you must claim the refund within 3 years or you may lose your right to it. To claim this refund it is important that all your tax returns are filed. The same holds true if you want to claim a tax credit such as the Earned Income Credit (EIC).
• If you have your own business and do not file a return, you will not be given credits toward Social Security retirement or disability benefits. If you do not file your tax returns, the IRS has no way of knowing how much self-employment income to report to the Social Security Administration.
• If you file your own returns as opposed to the IRS filing it for you, you can take all the deductions available to you and lower your tax liability as much as possible.

Consequences of Filing Unfiled Tax Returns

• When you file your returns you may be pleasantly surprised to know that you may be receiving a refund.
• If you do end up having to pay more in back taxes than you can afford, you can get a tax attorney to negotiate some method of paying the taxes which suit you and the IRS.
• Filing un-filed tax returns may involve paying some penalties and interests. You do not have to pay any penalty for those years when a refund was due to you, but you have to pay a penalty for those years where you had a tax liability. Whatever this amount turns out to be, you can negotiate with the IRS for a reduced settlement.

Failure to pay taxes will not put you in jail, but repeated failure to file returns may end up with the IRS taking legal action and you might have to pay heavy damages and also serve a jail sentence. So it is always better to file your tax returns, even if you have no money to pay the taxes.