Forgetting to file your tax returns can create anxiety, embarrassment and sleepless nights and now you are in need of getting caught up on tax filings you missed. You are likely concerned about how much the filing error will likely cost you in fines and penalties & you want to know how to go about correcting the filing error in a way that mitigates or at least does not make worse the consequences faced.
Taxpayers who fail to file when they have an obligation can face significant penalties for their noncompliance. However, taxpayers who are proactive and make good-faith efforts to correct their past filing errors may be able to reduce or eliminate penalties they owe and any potential criminal tax exposure surrounding non-filing.
The Consequences of Failing to File
Taxpayers who do not file their taxes, are ineligible to receive any tax refund they may be entitled to receive. Furthermore, taxpayers who do not file their return within three years of its original due date will lose any right to claim an available tax refund. Thus, even prior to considering the potential penalties and other negative consequences that can be imposed for non-filing of taxes there is already good reason as to why nearly all U.S. taxpayers should make their annual filings and work towards getting caught up on tax filings.
Taxpayers who fail to make a timely income tax return filing can face a failure to file penalty. The penalty is assessed at five percent of the unpaid tax bill for every month or part of a month where the obligation remains unsatisfied (maxes out at 25% after just being late 5 months). A failure to pay penalty can also apply. Furthermore, taxpayers who fail to make their own tax filing can have their taxes filed on their behalf through a substitute return (IRS) or proposed assessment (FTB). While the prospect of having the IRS or FTB handle your taxes for you can sound tempting, the fact is the taxing authorities will not figure your taxes to your benefit. In fact, many taxpayers who face this type of situation will be presented with a hefty tax bill because they will prepare your taxes in their favor – not yours by ignoring many available deductions. Combined with the penalties that can be imposed, a simple mistake of falling out of the system can quickly add up to a major tax liability.
We Can Help Getting You Caught Up On Tax Filings
If you have failed to file taxes or have concerns about an incomplete filing, our experienced tax advisors at Compass can help getting you caught up on tax filings. To schedule a consultation to discuss your tax options call or contact us online.