Every year the IRS requires taxpayers to file a tax return that reports all income to the IRS and pay any taxes owed on that income. For various, often justifiable reasons, well-meaning taxpayers do not file their tax returns. This can leave a taxpayer open to substantial penalty and interest charges, and will prevent the IRS from being open to working out a solution for most tax problems. It is therefore essential that all required past due returns be filed.
Filing an unfiled tax return often requires more expertise and strategic planning than filing tax returns on time. First, if you have not yet been contacted about an unfiled return, and the return was due more than six years ago, the generally accepted approach is to not file the return at all. With a few exceptions, internal IRS policy is to not bother pursuing taxes that may be due on unfiled returns that are more than six years old. If you file a return, this will void the IRS policy and you are unnecessarily opening yourself up to potentially paying taxes that the IRS has for all intents and purposes, forgiven. The IRS is nevertheless still able to require returns that are more than six years old.
Second, in order to get into any type of agreement to resolve your tax debt with the IRS, the IRS requires that you be “compliant.” This means that you must have filed all your past due tax returns owed within the last six years. The approach to these returns differs from the approach one would take when filing a return on time. For instance, if you know you will not be able to pay the tax the IRS thinks you owe, it may not be worth your time sifting through all your old records and receipts in order to substantiate your expenses. Trying to lower the amount you may owe on these past due returns is not going to change what you can afford to pay. Additionally, the IRS will scrutinize an older past due tax return that claims expenses more closely than it would if the tax return was filed on time. This increases the chances of an IRS audit or the IRS rejecting your claimed expenses. It is important that unfiled tax returns must be as accurate as possible and that your claimed expenses be supported by accurate records.
Another major complication with past due returns is timing and place to file. Often, taxpayers with unfiled are under immediate threat of levy or other adverse action. If this is the case, filing the returns may be required in order to prevent the levy. But it is vital that the return be sent to the right location and more quickly than usual. Unfiled returns, depending on the circumstances, will have to be filed within specific timelines and at different locations than timely returns. Contact a Dallas tax attorney at Margolies Law Office for legal help filing your unfiled tax returns.