IRS Taxpayer Advocate: TAS TAX TIP: Filing Past Due Tax Returns

The IRS Taxpayer Advocate has the following advice for taxpayers who must file past due tax returns:

Did you forget to file your 2018 tax return by April 15, 2019? Have you not filed tax returns for several years?

If the answer is yes to either, here’s some information to help you catch up with your filing requirements. It’s important to file past due tax returns before the IRS does it for you (see Consequences of Not Filing below).

First, figure out if you need to file a federal income tax return or not. If you live outside the United States, see Tax Responsibilities of U.S. Citizens and Resident Aliens Living Abroad. If you are not required to file, you don’t need to do anything further.

Filing a 2018 Tax Return

If you need to file your current year federal income tax return, file it as soon as you are able. There are options for filing, and return preparation assistance available. If you owe money and can’t pay, there are solutions to help with that too.

Filing 2017 or Older Prior Year Tax Returns

Okay, so what if you do need to file, and discover you didn’t file for several past years?

First, don’t wait to start gathering your income information for each year and then file or find help to file all the returns required. If you need return preparation assistance with a prior year tax return and the IRS has already contacted you about that return, you may be available for assistance from a low income taxpayer clinic.

Consequences of Not Filing

Penalty, interest charges and other pitfalls

If you do need to file and you owe money, filing and paying sooner will generally limit interest charges and penalties, which can otherwise add up significantly.

If you are self-employed and do not file your federal income tax return, any self-employment income you earned will not be reported to the Social Security Administration and you will not receive credits toward Social Security retirement or disability benefits. Loan approvals may also be delayed if you don’t file your return.

Loss of refund

The IRS will hold income tax refunds in cases where the IRS’s records show that one or more federal income tax returns are past due. In addition, if you are due a refund for withholding or estimated taxes, you must file your return to claim it within 3 years of the return due date or risk losing the refund altogether. The same rule applies to a right to claim tax credits, such as the Earned Income Credit.

The IRS will file for you, but the IRS-filed return may not be as accurate as it should be

If you fail to file voluntarily, at some point the IRS may file a substitute return for you. First, they will send you a Notice of Deficiency proposing a tax assessment, then you will have 90 days to file your past due tax return or file a petition in the United States Tax Court (150 days if the Notice of Deficiency is addressed to you outside the United States). Filing a timely petition allows you to challenge the IRS’s determination without having to pay the liability in advance.

If the IRS files a substitute return, generally the tax the IRS assesses is much higher than if you filed on your own. The reason for that is the IRS is not allowed to determine filing statuses, other than single, for which you may qualify, and the IRS cannot give credit for deductions or exemptions you may be entitled to receive. So, it is in your best interest to file your own tax return.

The IRS will begin enforcement actions

If you do not file a return nor file a petition with the United States Tax Court, then the IRS will proceed with the proposed tax assessment, bill you and, if not paid, begin collection and enforcement actions. This can include such actions as a levy on your wages or bank account or the filing of a notice of federal tax lien. But that’s not all, depending on the amount owed, and in certain instances, your passport can be revoked or denied or your account could be assigned to a private collection agency.

If you repeatedly do not file, you could be subject to additional enforcement measures, such as additional penalties and criminal prosecution.

Alternatives for Help

For filing help, see the links below. However, if;

  • your problem is causing financial difficulties for you, your family or your business,;   
  • you’ve tried repeatedly to contact the IRS but no one has responded, or
  • you face (or your business is facing) an immediate threat of adverse action, you should contact us right away.

For help with issues beyond filing, try visiting our TAS website or IRS.gov. Remember, you also have specific Rights as a taxpayer. If you feel those rights aren’t being upheld, contact us.

Download the article on the IRS Taxpayer Advocate website by clicking IRS Taxpayer Advocate: TAS TAX TIP: Filing Past Due Tax Returns.

Posted by Jessica Zhang, Associate Editor, Wealth Strategies Journal.

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