One of the main benefits of filing tax returns is the peace of mind filers enjoy. On the other hand, non filers have to watch out for Uncle Sam, lest they get exposed. In most cases, non filers find it “convenient” not to file for fear of finally drawing the IRS attention and facing the consequences for their past indiscretions. It is even graver if the taxpayer has not filed for many years, maybe hoping that the IRS will somehow forget about their existence. This is a severe misunderstanding, because the IRS’s zealousness when it undertakes collection duties; the IRS will never simply “forget” about your tax past. In fact, some have even openly expressed reservations towards getting married to non filers with huge tax bills.
Sometimes, the IRS may not really bother with non filers, especially if the unfiled years would have resulted in tax refunds for the taxpayer. In this case, not filing your taxes will result in a missed opportunity for one to reclaim some funds.
With proper records, all back tax returns can be filed with the help of a tax professional. However, tax refunds expire after three years upon the expiry of the statute of limitations, the amount doesn’t matter. That is however, for the few scattered cases, but for the majority, you risk owing Uncle Sam a lot if you don’t file. If you are tired of looking over your shoulders and wondering if the individual next to you is an IRS agent who is trying to bust you, you can turn things around.
Call the IRS: Just like the story of the prodigal son, the IRS will receive you with jubilation the moment you “come back home.” It is misleading to assume that you will be handcuffed and thrown behind prison bars. You can find guidance on how to file all back taxes, and with the help of a signed IRS Form 2848-Power of Attorney, your tax pro can represent you through this process. A tax pro will find any Substitute for Returns (SFRs) available and negotiate with the officials on suspending collection as you prepare to file.
Records are Never Lost Really: If you don’t have your tax records, you shouldn’t panic. The IRS has copies of all relevant tax documents and you can request transcripts of any third party documents like W2, 1098, K-1 and 1099 that might have been sent over the years. Your banks can also help fill in other blanks. The self employed non filers who are supposed to file Schedule C that are without tax records are advised to apply industry standards. You may have to provide standard incomes from the business, like total annual sales.
Don’t be Scared of High Tax Bills: The IRS generates Substitute for Returns (SFR) whenever taxpayers fail to files. The figures on SFRs are usually abnormally high because they are based on estimates, but the figures will normally come down on the real tax return. In fact, you might still be eligible to some refunds. Please note that you can still file even if you cannot pay.
It takes about eight weeks for the IRS to prepare and send a comprehensive bill detailing penalties, interests, and taxes owed. If the tax bill is too huge, you can choose to be deemed currently not collectible, negotiate for an Installment Agreement payment arrangement, or an Offer in Compromise. You cannot solve your tax woes by hiding, they only will haunt you and get worse over time.