If you have unfiled tax returns as an individual or married couple, or on behalf of your business, you are not alone. Many people choose not to file their federal returns for a variety of reasons, some forget to do so and some do not understand the requirements.
Talk to a tax lawyer right away
You may have already heard from the IRS about an unfiled returnor you may even face an investigation or audit. Even if you think you probably should have filed a return and have not yet received IRS communication about it, it is important to seek immediate legal advice from a tax lawyer about how to proceed because the IRS may be prepared to take a next step in your case.
Legal counsel will relieve the pressure of communicating and negotiating with the IRS by doing that on your behalf until the matter is resolved.
Depending on the circumstances, the consequences can be very serious. In some situations, failure to file a return and pay taxes owed can eventually culminate in a criminal conviction that can require fines and even prison time.
For example, a federal judge recently sentenced a former state legislature in Florida to jail time followed by probation for a misdemeanor conviction for failing to file a return in a year in which he earned about $270,000.
Options for resolution
An attorney, especially one who is also a CPA, can assess the situation involving unfiled returns and advise you of your options to proceed and the likely outcomes. For example, after careful analysis, you and your lawyer may decide to voluntarily complete and file past due returns to come into compliance and negotiate a resolution with the IRS. For example, the agency may be willing to enter into an installment agreement or accept an offer in compromise to settle the amount owed. There may be other options to resolve your case.
More about failure-to-file consequences
The IRS on its website explains some of the potential negative consequences of not filing an income tax return:
- Interest assessed on past due taxes
- Monetary penalties for late payments
- Eventual loss of right to claim a refund or certain tax credits
- Loss of Social Security credits if you are self-employed
- Difficulty applying for loans or other credit
- IRS-created substitute return that may not include deductions, credits or exemptions otherwise allowed
- Tax assessment
- Tax lien
- IRS collection efforts, including wage garnishment or asset seizure
- Possible criminal prosecution
Not all of these consequences are likely in every case, but if you have unfiled tax returns, seek legal counsel as early as possible to help you in responding and resolving the matter, and for assistance in meeting important deadlines.