Unfiled Tax Returns

Past due returns... We can file them for you.

A. Consequences of Not Filing

• It is a crime not to file a tax return if taxes are owed.
• It is not a crime if a tax return is filed but no payment is made.

 

B. How the IRS finds Non-Filers

The IRS looks for non-filers through its automated Information Returns System (IRP). This highly effective operation matches information documents such as W-2 statements and 1099 income reports from payers (such as the taxpayer's employer) to the rolls of filed returns. If the IRP system fails to match up a 1099 or W-2 with a filed return, the IRS initiates a Taxpayer Delinquency Investigation (TDI). As a general rule of thumb, because of the accuracy of this system, the IRS is able to identify delinquent filers within 1 to 2 years after a filing due date. The taxpayer is notified and a request for the tax return is sent out. If the taxpayer does not respond to this request, the IRS will prepare a tax return on behalf of the taxpayer, known as an SFR (Substitute for Return). Unfortunately, the IRS does not include any tax credits or deductions the taxpayer may be entitled to in this substitute return. This ensures that the taxpayer will be paying taxes for the highest tax bracket applicable to his or her income. Once the SFR has been established, the IRS begins the Collections Process.

C. Criminal Consequences of Not Filing

A willful failure to file a tax return is a misdemeanor if the taxpayer owes taxes. The fine can be up to a year in jail and a $25,000 fine for each year of non-filing.

D. It’s Far Better to File Before the IRS Files For You

It's never too late to file. Currently, the IRS has a general policy of not prosecuting those who file before they are contacted by the IRS. The IRS is also more lenient in its collection efforts from a taxpayer who voluntarily files all unfiled tax returns.

E. Filing Delinquent Returns will eliminate SFR Assessments

Another extremely important point is that, by filing delinquent returns, the assessment (actually an estimated amount) arrived at by the IRS from filing a Substitute for Return (SFR) is typically changed to a lesser amount because the actual tax returns filed by the taxpayer will include all deductions and tax credits the taxpayer is entitled to. For example, an SFR may show that a taxpayer owes $25,000 to the IRS without deductions and credits, but the actual amount owed may very well be half of this amount, or even less, after the taxpayer's deductions and credits are calculated.

Call United Tax Group at (877) 829-3703. We can start preparing your unfiled tax returns today.