How the IRS Deals with Unfiled Tax Returns
If you have unfiled tax returns but the IRS is aware that you don’t owe taxes, you may fly under their radar. The IRS will not reach out to you if you are owed a refund on previous years’ tax returns.
However, even if you assume you don’t owe income tax, the IRS may not agree. If you fail to file a tax return, the IRS can file one for you—it’s called a substitute filing. The IRS uses W2s and 1099s from your employer(s) and other payers to complete the filing.
The substitute filing is an estimate on the part of the IRS, and not a very accurate one. It doesn’t include the deductions that you could be owed. An IRS substitute filing can show more taxable income, a higher tax rate, and greater tax liability than if you filed the past-due tax return.
Based on their substitute filing, the IRS can bill you for back taxes, plus failure-to-file penalty fees. The penalties and interest stack up if you are late in paying the amount they have assessed as due.
Why Submitting Unfiled Tax Returns is Always the Best Option
What if the IRS has already filed a substitute return on your behalf?
In most cases, you’ll become aware of the substitute filing when you receive a bill from the IRS for back taxes. When this happens you should act immediately to file an accurate tax return for the prior year(s) in question.
Filing past years’ tax returns can often reduce the balance that the IRS claims you owe. In effect, you are countering the IRS’ substitute filing with a more accurate tax return. When done correctly, the IRS will almost always accept the numbers you submit and allow the deductions you claim. As a result, you may find you are owed a refund or that the tax balance due is smaller than the IRS estimated in the substitute filing.
For anyone with IRS tax issues, filing back tax returns is one of the most effective tools for reaching a resolution. Compliance is a first step in reaching any agreement with the IRS.
However, if not done correctly, filing or amending returns can create more problems and an even bigger tax bill.
We Can Help with Unfiled Tax Returns
Together, the Precision Tax Relief Team has over 50 years of experience in Tax Accounting.
We maintain a dedicated tax preparation department and employ skilled and experienced CPAs and EAs that understand tax law, as well as financial accounting.
Unlike most tax preparers, who deal with tax returns only an average of 5 months per year, PTR experts prepare tax returns all year.
Because many of our clients haven’t filed a return for several years, we’re more familiar than the average accountant or tax preparer with both current and prior tax laws and regulations.
Working with a dedicated, licensed and experienced tax preparation expert from Precision can dramatically change your back tax balance. In many cases, we have eliminated a client’s tax liability just by preparing back tax returns or amending improperly prepared returns.
Get Help With Back Tax Returns
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