For an array of reasons, some taxpayers have not filed taxes in years. Motivations for this approach to taxes vary, but some taxpayers will fail to file because they don’t think they earn enough money for the IRS or California Franchise Tax Board to notice. Other taxpayers, in particular self-employed individuals, may have failed to realize that their income was subject to additional taxes and therefore did not have the funds available to pay all or some tax obligations. At least some taxpayers may mistakenly believe that failing to file “keeps them off the IRS’s radar.”
Unfortunately, taxpayers who fail to file taxes place themselves in a difficult situation. Aside from exposing the taxpayer to a potentially open-ended audit risk, there are many drawbacks to failing to file taxes. And yet, millions of taxpayers fail to file each year. The Roseville tax lawyers of the NewPoint Law Group, LLP can help individuals who have failed to file for years or just last year. To schedule a confidential consultation, call the NewPoint Law Group, LLP at 800-358-0305 today.
A Failure to File Income Taxes Means You Can’t Get a Tax Refund
Individuals who fail to file a tax return are barred from receiving their income tax refund even if they are entitled to one. Furthermore, the failure to file taxes within three years of the original due date will typically mean that the refund is lost forever. Therefore, if you have failed to file taxes in the past three years and believe that and you and would have received a refund, filing taxes can actually end up putting money into your pocket.
Not Filing taxes Means You Can Face a Failure to File and a Failure to Pay Penalty
Taxpayers who fail to file their taxes also open the door to facing fines, penalties, and interest that can inflate their tax bill well beyond the original obligation. It is important to note that the duty to file taxes and the duty to pay taxes are actually to separate, distinct obligations. Thus, it is possible to be assessed two penalties when you fail to file taxes. The first is a penalty for non-filing. The second is a penalty for nonpayment.
Furthermore, taxpayers who file an extension of time to file their taxes can still face the penalty for a failure to pay their taxes by the due date. Therefore, even if you file an extension, it is important to ensure that a sufficient payment has been made to cover your expected tax liability. If you overpay, the overpayment will be included in your refund when you actually file.
A Failure to File Means You Can Be Audited Forever
In general, a three year review period constrains the IRS’s ability to audit your taxes. However, when certain circumstances are present, such as a substantial understatement of income, this review period can be doubled. However, if you never file taxes that means that the statue on limitations never begins to run. Since the statute of limitations is tolled by your non-filing, you can theoretically be audited indefinitely for a failure to file taxes.
Won’t I Face Huge Fines and Tax Bills if I Haven’t Filed in Years?
There is simply no one-size-fits-all answer to this question. The consequences you face will be based on the facts and circumstances surrounding your situation. In some cases, and as mentioned above, the taxpayer may not have owed any taxes for the years where he or she did not file. Furthermore, he or she may have even been entitled to a refund for those years. In this scenario, filing back taxes can actually result in positive cash flow while eliminating a major source of worry and anxiety.
If the taxpayer owed taxes, it is true that he or she can face fines, penalties, and interest. However, the IRS has a policy of mitigating potential penalties against taxpayers who come forward voluntarily to correct tax errors and oversights. Furthermore, if the IRS detects your failure to file before you come forward, penalties will be significantly harsher. Therefore, even if you owe money when you failed to file taxes, in the long-term, it is often prudent to correct the errors.
Work with Our Roseville, California Tax Lawyers
If you have tax questions or concerns due to a failure to file, the lawyers of the NewPoint Law Group, LLP can help. If you have come under audit due to unfiled taxes, we can work to handle the audit and set ground rules for the audit so that the process does not spiral out of control and into new areas of inquiry. To schedule a confidential tax consultation with a Roseville tax audit lawyer, call 800-358-0305 today.
