Late filing, what if I haven’t filed taxes in years and I have IRS Tax Debt?

Putting off preparing all of those unfiled tax returns?  Don’t let them pile up because as time goes by, there is less and less information available to you for preparation.  You also just tend to forget what happened in those years.  Even worse, the IRS, after making demands for those unfiled tax returns, can file a substitute for return (“SFR”) based upon only information reported to them.  You don’t want that so file your back taxes!

Late filing -Gather your documents

If you have a lot of past due tax returns or even one return that is delinquent from many years back, you may have a mental block in getting started due to having to compile the older documentation.  It can be done.

Luckily, you can call or order online, IRS wage and income statements that show all income reported (w-2s, 1099s).  However, you will have to compile personal expenses or business expenses from your bank statements or from any kept receipts.

The important thing is not to stress.  Find a reputable tax preparer that can assist you through the process.

Late filing – Will I get my tax refund?

If you finally file your return and you are expecting a refund, the time limit for receiving your refund is three years from the original filing deadline.  Let’s say the deadline for your 1040 return is April 15, 2016.  You will thus have until April 15, 2019 to file an original return and to claim your refund.

If you do not file within that three-year time frame, the refund expires.  This means that you will not receive the overpaid amount and will not be able to apply that refund to any other years owing.  Essentially, you are giving away money to the IRS so definitely file before the three-year statute of limitation expires.

Late filing – What if I just don’t file?

When you don’t file, you run the risk of the IRS preparing a tax return for you based upon the information reported to them, called a substitute for a tax return (“SFR”). The IRS does this so they can assess tax and begin collection activities.  You can get “account transcripts” from the IRS to see if this was done.

You may be infuriated and ask yourself, can the IRS do this?  Yes, according to IRC §6020 (b), the IRS is authorized to prepare tax returns based upon information available to it in situations where a person has not filed a return.  For more information on SFRs, see the Internal Revenue Manual 4.12.1.

Since they can do this and they have, then why should you bother filing original returns?  Because the IRS does not have all of the tax information you may have and does not include any additional expenses, tax credits or exemptions to which you may be entitled.  As you can see, it may greatly overstate your actual tax liability.

It is generally best to file an original tax return and ask the IRS for “SFR Reconsideration.”  See IRM 5.1.15 for more information on the reconsideration process. If you do not file an original return, the SFR will remain and the IRS will send a letter asking you to consent to the proposed tax.  If you ignore it, they will issue a statutory notice of deficiency (“SND”).  If you do not respond to the SND, the IRS will move forward with collections and may place a levy on your bank accounts and/or garnish your wages.

Late filing – Tax resolution options

If you have a balance due on your original returns or if you agree with the IRS SFR, look to resolve the IRS tax debt with a payment plan, currently not collectible status or offer in compromise.  You must move quickly as active collections are taking place.  It is best to get tax help with an experienced tax relief attorney to get a resolution put in place most advantageous to you and your financial situation.

Taxpayers needing tax help with a late filing and how to file back taxes and tax debt help should seek the advice of a qualified tax attorney.  The Los Angeles Tax Attorneys at Delia Law have many years of tax fraud experience and will competently represent you before the IRS.  Please call for a no-cost tax attorney consultation for tax resolution at (310) 494-0100. We look forward to helping you.

This blog post is not intended as legal advice and should be considered general information only.

Keywords:  Late Filing, Unfiled tax returns, file back taxes, past due tax returns, how to file back taxes, tax debt help, IRS tax debt, tax relief attorney