“Better late than never” applies when it comes to filing income tax returns.
Here’s what you should know.
Maybe you didn‘t get your 1040 done in time in a previous year and figured you couldn’t still file your income taxes. Or you thought you owed money that you didn’t have. The IRS knows that people file late sometimes, and it has systems in place to deal with that.
It’s absolutely critical that you file every year, for a variety of very good reasons. Failure to file means that you might:
- Incur interest and penalties.
- Lose a refund (you can claim a refund for up to three years after the return due date).
- Reduce your Social Security benefits. If you’re self-employed and don’t file, you will not be credited for income that year.
- May not qualify for credit and lending opportunities.
- Certain professional licenses (CPA, legal) may be revoked in some states.
- May be prohibited from serving in public office
Extenuating circumstances? Don’t Panic!
Were you or a family member extremely ill or disabled? Did you suffer severe hardships due to natural disasters? If you didn’t file because of hardships, we at Urbach & Avraham, CPAs can assist you in requesting an abatement from the IRS of penalties imposed due to the late filing.
File It ASAP
As soon as you realize you have a past-due tax return, you should prepare and file it.
If you can’t pay what you owe when you file, you can ask for an additional 60-120 days to fulfill your financial obligation. If that’s not enough time and/or you’re going to need to pay in installments, you can apply for an IRS Payment Plan.
What If You Don’t File?
The IRS may file a substitute return for you. If this happens, you may not get all of the deductions and credits that you should. We advise you to still file a tax return that includes everything, even if the IRS already prepared a substitute return. The IRS usually adjusts the return they created to reflect credits, deductions, and exemptions when they’re made aware of them.
The IRS will notify you if they file a substitute return. If you don’t’ file or submit a petition to Tax Court, the IRS will proceed with its proposed assessment, which will trigger a tax bill. Failure to pay it will result in your account going into the collection process. This can include the filing of a federal tax lien or a levy on your bank account or wages. If you continue to ignore the bill, you may be subject to additional penalties and/or criminal prosecution.
If prior year information is required, we can assist you in obtaining IRS transcripts. These transcripts provide all sources of payors of wages, interest, dividends, pensions and proceeds from sale of securities and real estate.
On Your Mark, Get Set, File!
Any correspondence from the IRS can create anxiety, as can realizing you missed a tax deadline. At Urbach & Avraham, CPAS, we encourage you to contact us if you’re concerned about a return you didn’t file. We can help you understand what your options are and how to proceed. We can assist you in abating penalties and obtaining IRS Transcripts if necessary. We can also help with tax planning throughout the year, so you don’t have to deal with a past-due return again.