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Tax Returns - Failure to File

UNFILED TAX RETURN - MISSING TAX FILINGS

The IRS has started again to send the collection notices to taxpayers from late October. These notices were paused due to COVID-19. Now, the IRS’s mail backlog is caught up enough to enforce non-payments, and they will start levies, lien, and other threatening collection activities.

The IRS has slowed down in many aspects due to COVID-19, but the agency never stopped investigating people who haven’t filed tax returns. Pursuing non-filers can be one of the IRS’s most efficient enforcement strategies because issuing failure to file notices can be a cost-effective tool that requires little more than automated notices.

​There is an ever-increased chance that the IRS will start ramping up its enforcement activities right after the presidential election is over.
 

Consequences of Non-Filing Your Tax Returns

Why are there so many non-filers? Many citizens misunderstand and think, “If I don’t file, the IRS will never know.” Or, “I didn’t get any notices the following year. Does that mean I had a clean get-a-way?” Unfortunately, none of this is true. Taxpayers who fail to file, are only increasing their vulnerability and their tax liability by not filing. The IRS will investigate and catch up with non-compliant cases in the following years. Once the IRS system (

Automated Collection System (ACS) discovers a non-filer, it will send out warning letters and make threats that the agency will back up with actions. Failure to file a tax return may be construed as a criminal act by the IRS and can be punishable by up to one year in jail for each year not filed. If left unresolved, the non-filers find themselves in a tough spot when the IRS freezes and seizes their bank accounts, levies (garnishment) their wages, seizes or sells their assets, suspends their passports, takes their retirement funds, takes their home, and so much more.

Why Should Non-Filers File Tax Returns As Soon As Possible?

If a taxpayer hasn’t filed tax returns in the past several years, it is strongly recommended that they file their returns as soon as possible, even if they can’t pay them off at the moment. You must become "compliant" with the tax code.

If taxpayers fail to file or pay the returns, the IRS will keep adding penalties at an extremely high rate and also charge them interest. The IRS charges 5% of the amount due every month for failure to file, and 0.5% for failure to pay for a maximum of 25% each. Because of a 0.5% reduction in penalty for any month, the maximum penalty amount combined is 47.5% of the taxes owed.

Compliance is Required before Resolution

The tax pros at Flat Fee Tax Service can get you back to compliance by filing back tax returns, which will stop the failure-to-file penalty. It's quite possible that our team can dramatically reduce your tax debt by filing your missing tax returns.

To be Compliant, You Must:

1. File tax returns for the most recent six years, and

2. Make current tax payments. a. sufficient withholding (W-2 employee) b. estimated tax payments (self-employed) c. quarterly payroll tax deposits (business)

Once You Become Compliant, You May Be Qualified for these Tax Relief Programs:

If qualified, an Offer in Compromise allows a negotiation to settle back tax liability for a substantially reduced amount from the full amount owed. Keep in mind that the IRS can reject the offer if the financial documents are not professionally prepared or the taxpayer is not in compliance with the IRS. For applicants who have not filed all of their tax returns or made all required estimated tax payments or deposits, their settlement offers will be rejected.

IRS Installment Agreement

An IRS installment agreement is for those who are unable to make the full tax payment immediately. Getting into a payment plan with the IRS may appear to be easy, but we recommend you consult with a tax professional before agreeing to anything. There is a limit to how much they can owe to qualify for the agreement for online application. Thus, non-filers should consult with a tax relief professional for detailed information.

Currently not Collectible

Another method is to see if they qualify for a Currently Not Collectible status upon submitting a financial statement. If the taxpayers have no means to pay the debt at the moment or anytime soon, they can request the IRS to delay the collection process until their financial situation improves. Note that this doesn’t mean the back tax liability will go away. The IRS can come back and collect your taxes years later.

If you’re struggling with tax problems, it is strongly recommended that you seek help from tax relief experts who can guide you through the most suitable resolution method and reduce the liability owed to the IRS to the lowest amount possible if you qualify. This can resolve your non-filing problems effectively and permanently.

This article is brought to you by the tax professionals at Flat Fee Tax Service. Our IRS problem solvers are strategically located in San Diego, California, and Clearwater, Florida. This allows our teams to be available from 8 A.M. Eastern to 6 P.M. Pacific time. This is a tremendous advantage when having an IRS levy stopped and released in one day.