Receive Help with Back Taxes and Unfiled Tax Returns

Having unfiled tax returns is a common tax problem that leaves people owing all kinds of money to the IRS. The number of taxpayers that accumulate past-due tax returns is surprisingly high and continues to increase. As the IRS cracks down to try and reduce the tax gap, we can all expect to see the number of substitutes for return (SFRs) go up and the number of taxpayers owing back taxes grow.

The IRS takes a severe view of unfiled income tax returns, and sees this as a pattern of behavior that can be construed as criminal. The IRS does not have to negotiate with you, no matter how dire your circumstances, until you are in compliance. To be in compliance, you must have all your back taxes filed and be in the process of paying your current year tax bill. This means you can expect to see no relief from IRS collections actions such as wage levy, and no consideration for tax debt relief of any sort, until your returns are filed and you are paying your current tax bill.

File Your Unfiled Tax Returns

The most important thing you can do to stay out of trouble with the IRS is to file your tax returns every year on time. And if you haven’t filed a tax return from any year over the past seven years, you can minimize penalties and interest by filing those unfiled returns sooner rather than later.

Intentionally not filing your tax return is a federal crime. However, the IRS understands that mistakes happen and they give you a limited opportunity to file past-due tax returns and even to amend a tax return if you need to.

IRS Notices You Haven’t Filed

The IRS may send you a notice requesting that you send in an unfiled tax return late in the same year it was due. They may also wait several years to notify you that they have not received your return from a given year. By and large, the thing to recognize is that the IRS will eventually notice that you haven’t filed a return and they will pursue you for the associated back taxes.

Substitute for Return (SFR)

If you are on the fence trying to decide whether to take care of an unfiled tax return, our advice is to file it as soon as you can. If you wait for the IRS to act, your penalties, interest, and fees will be higher than if you handle the returns beforehand. If you don’t file a return that is past due, the IRS will file what is called a substitute for return (SFR) for you. A substitute for return is put together by the IRS based on their best guess of what they think your income was for a given tax year. They figure in cost of living wage increases and other factors to estimate how much you make and, by extension, how much you owe in back taxes. They will, of course, add all relevant fees, penalties, and interest to grow what you owe into a significant tax debt if you’re not careful.

SFR = No Deductions

One of the things a substitute for return does not do is take into account any non-standard deductions you might be able to claim. Without deductions, your tax bill goes up. That’s why it’s so important for you to file your tax return even if the IRS has filed an SFR for you. In most cases, you can send in an unfiled tax return even after the IRS files a substitute return.

Consequences of Not Filing Past-Due Returns

If you fail to file a tax return, the IRS has the ability to paralyze you financially. They can keep you from obtaining student loans, buying a house, refinancing a house, or getting credit from most lenders and credit card companies until you pay all delinquent taxes.

The IRS can also seize available cash from your bank accounts and Social Security benefits, often when you can least afford to lose the income.

Also understand that certain federal and state benefits, like Social Security and Medicare, are available only if you file federal tax returns. Because benefits from these two programs are based on your lifetime income, the agencies depend on information in your tax returns to calculate your entitlements. If you don’t file federal tax returns, you can cheat yourself out of prolonged federal benefits. Some state benefits like unemployment compensation are also based on income reported on your tax returns.

Unfiled Tax Returns and Federal Law

Over the last several years, the IRS has improved its database of income transactions and increased its ability to identify people who have not filed taxes. If you have unfiled returns, you rise to the top of the list of people the IRS wants to target to collect revenue. If you can file before the IRS gets to you, you stand a good chance of resolving your tax problems relatively painlessly.

But if you wait for the IRS to find you, the cost of additional tax penalties grows exponentially. And if the IRS seeks you out before you have filed past-due returns, the likelihood of increased penalties escalates.

The IRS has a wide range of punishments and penalties available that they can impose on persons who don’t file returns. Intentionally not filing, or filing a false return, defies federal law. Our unwavering advice is to act to resolve your unfiled return before a simple mistake grows into a problem you can no longer remedy.

TaxMasters does not provide legal services and cannot offer an opinion as to whether the failure to file a tax return or pay taxes in your case or any other case constitutes a prosecutable crime. TaxMasters does not represent taxpayers in criminal tax cases. Our aim is to help taxpayers before tax problems can escalate to the point of being classified as criminal.

Statute of Limitations

To claim any refunds due to you, you have to file all current and back tax returns. In cases where a return was not filed, the law provides most taxpayers only three years to claim a refund. If no return is filed to claim the refund within the three years, the money becomes the property of the U.S. Treasury. After the statute has run, not only does the IRS keep the refund check, but they will refuse to apply any credits, including overpayments, to other tax years. The bottom line is that there is nothing to gain by waiting to address your unfiled tax returns. This is a problem you can fix and it’s one you should address preemptively and head on.

Most Common Excuse for Unfiled Tax Returns – I Can’t Pay what I Owe

Many people worry so much about not being able to pay the IRS that they don’t file. This is a mistake the IRS will make you pay for dearly. Don’t let worry about owing the IRS money keep you from filing your tax returns. If you are not able to pay your taxes, the IRS offers payment options. Check out our IRS Tax Relief page for more information on filing past-due tax returns, setting up payment plans, and settling tax debt. The weight you feel can be gone if you just ask for help. We can take care of your unfiled tax returns and you can avoid the mess that’s heading your way. We’re here when you need us.

The IRS takes a harsh view of unfiled returns, and sees them as a pattern of behavior that can be construed as intentional failure to file. At a minimum the IRS does not have to negotiate with you, no matter how dire your circumstances, until you are in compliance. So the sooner you file all your back taxes and pay your current year tax bill, the sooner the IRS will be willing to negotiate with you.