It’s unlikely that any adult in Texas can’t tell you when federal income tax forms are due: April 15 is a date that is etched on the minds of most workers and business owners. But what happens if you fail to file a return by the appropriate date? According to the Internal Revenue Service, delinquent or missing tax returns can spark a full investigation.
The IRS reportedly flags random returns for review, and agents are also assigned random tax accounts for compliance checks. During the course of either review, agents are supposed to pull up historical records regarding the tax payer or business via IRS databases. If the agent determines that returns are missing, then further investigation is warranted.
According to IRS procedures, agents are supposed to attempt to make a determination about whether a failure to file appropriate returns was willful or represented potential fraud. In those cases, the agent discusses the matter with a Fraud Technical Advisor, and the matter is turned over to a criminal investigation unit if the FTA deems fraud may be involved.
If fraud is not thought to exist in the case, then agents notify the tax payer or business regarding the delinquencies, and the tax payer must file all appropriate returns at that time. Even if returns are years out of date, they must be filed, which can result in enormous penalties and interest accruing on top of the original tax bill.
The IRS does work with tax payers in such situations and relief can come in the form of negotiation of an offer in compromise or other tax payment structures. Understanding all options and working with a third-party who understands how to deal with the IRS may make the process easier and less stressful.
Source: Internal Revenue Service, “Overview: Initial Delinquency Procedure” accessed Feb. 02, 2015