What to Do If You Forget to File Taxes
I am not sure how you would forget to file taxes, but if you do, there are steps to remedy the offense. Here is a rundown of what to do if you have indeed forgotten to file taxes or were thinking of skipping out on this basic part of financial life. Hint: it’s not a good idea, but it can be fixed.
Do Not Panic
First thing’s first. Understand that the IRS very rarely pursues criminal action. It would take a lot more than a missed deadline, like owing a substantial tax bill and making no effort to pay it. The more likely outcome is that you will receive a penalty. In fact, you are guaranteed one of two penalties that the IRS imposes when you fail to file. These are:
- Failure to file
- Failure to pay
While the failure-to-file penalty is non-negotiable, there is a lot you can do to avoid the second penalty.
As I said, I have not heard of an instance when a taxpayer who had filed late was able to avoid the first penalty. Worse yet, the amount due will accrue interest if you do not take action immediately. In other words, you are paying for each day you do not file your taxes. Putting off filing taxes costs money so take action as soon as possible. Contact an IRS representative to begin the conversation. The toll-free number is 1-800-829-1040.
You’ll want to avoid the worst-case scenario of having to find a lawyer, show up in court, and defend yourself against the IRS. Those legal fees aren’t a joke on top of whatever taxes you owe.
File Your Tax Return Late
Even if you cannot afford to pay your tax debt, file your income tax return. You should know that the amount of the penalty is generated in accordance with what you owe in taxes. The penalty should be waived if you do not owe anything to the IRS. However, you would only know that you do not owe tax debt if you submit your tax return. Generally speaking, the only instance in which you do not need to file is when your income is less than the amount disclosed in IRS Publication 501. For example, the 2017 requirement is that you must file if you made at least $10,400 as a single person under the age of 65.
In this regard, failing to file isn’t all doom and gloom. As I mentioned, you could not owe any money to the IRS. Even better, the IRS could owe you money. By not filing, you could be missing out on a considerable refund. There is a deadline of 3 years from the due date of your unfiled tax return to claim a refund. The catch is that you are expected to file all past overdue tax returns to date, not just the one the one for which you anticipate a refund. After the 3 years, your potential refund is surrendered to the government.
IRS Taxpayer Advocate Service
The IRS has a division dedicated to helping taxpayers pay overdue taxes. The IRS Taxpayer Advocate Service offers programs and installment plans to make payments possible for people who cannot afford to pay the penalties and interest that have accumulated on their late return.
But before agreeing to any payments, I would seek a secondary opinion with a Community Tax relief professional. Remember that no matter what agreement you strike with the IRS, you will continue to pay interest on your debt. You may as well determine if you can avoid the debt altogether.
Currently Not Collectible Program
The IRS temporarily suspends its efforts to collect your tax debt when you qualify for the Currently Not Collectible (CNC) program. Those eligible have agreed to the amount due, but cannot manage both their living expenses and their tax bill. The IRS will continue to send you this bill annually, adjusting the balance to take into account the interest and penalties that continue to accrue with time.
Tax Liens and Criminal Prosecution
The fact that tax penalties and overdue fees do not cease to accumulate may inspire you to seek other avenues. But you shouldn’t be discouraged by them – they can be relatively easy to manage when you act quickly. Truth be told, they are the lesser evil when you consider the alternative to not paying them. No matter how you look at it, filing taxes is the way to go. If you do not file, the IRS is within its rights to establish a tax lien and seize your property, including assets like wages. These may eventually be put up for auction and sold. The IRS can also prosecute you for fraud.
Better late than never. File your tax returns, even if you missed the deadline.