Unfiled Tax Returns


What Hap­pens if You Did Not File a Tax Return?

By this time most of you must have filed your 2012 tax returns already, as the fil­ing dead­line on April 15 had long passed. But if you are among those who failed to file their tax returns, includ­ing those with unfiled tax returns on pre­vi­ous years, the IRS may go after you and impose penal­ties. In extreme cases, IRS may even ini­ti­ate an inves­ti­ga­tion for pos­si­ble fil­ing of crim­i­nal charges.

Based on our expe­ri­ence at Tax Release, most peo­ple fail to file tax returns not because of an inten­tion to evade pay­ing taxes, but due to igno­rance, an hon­est mis­take, over­sight, tax­payer not hav­ing enough money to pay taxes or plain procrastination.

For exam­ple, we once had a client whose tax returns were reg­u­larly pre­pared and filed by her hus­band under a “mar­ried, fil­ing jointly” sta­tus. But after her hus­band died, my client who had been accus­tomed to her hus­band tak­ing care of their tax returns, did not file her tax returns, year after year, until IRS started notic­ing and began impos­ing penal­ties for not fil­ing. My client was sim­ply intim­i­dated by the task of fil­ing her tax returns as her deceased hus­band took care of every­thing before.

Every income earn­ing indi­vid­ual is required by law to pay taxes as part of sup­port­ing the gov­ern­ment in rais­ing rev­enue. The gov­ern­ment deter­mines how much each per­son must pay in taxes through the income tax return (IRS Form 1040) that must be filed every year with the IRS.

If you don’t file your tax return, you will be liable for penalty and inter­est on taxes due. Inter­est may also be imposed on the penalty. In other words, you will end up pay­ing more if you do not file your tax return and do not pay the taxes due on it.

Although the IRS relies pri­mar­ily on your filed tax return to deter­mine how much taxes you owe, the IRS has other sources to ascer­tain your income, such as reports sub­mit­ted to the IRS by employ­ers or other enti­ties which are required by law to pro­vide income infor­ma­tion. The IRS will find out how much money or income you made even if you did not file your tax return.

Aside from penal­ties and inter­ests, you may miss out on impor­tant ben­e­fits you would oth­er­wise be enti­tled by fil­ing a tax return. If you don’t file your tax return, the IRS may pre­pare a return for you known as a sub­sti­tute for return (SFR). If this hap­pens, chances are the IRS will not include all deduc­tions and exemp­tions to which you may be enti­tled which will result in the high­est tax assess­ment pos­si­ble. Also, if you fail to file your tax return, you may lose any tax refund due to you.

There are many more ben­e­fits – and dis­ad­van­tages – by not fil­ing a tax return. So, if you did not file your 2012 tax return and/or you have years of unfiled tax returns, it is still not too late for you to cor­rect what would oth­er­wise be a costly omis­sion. Even if you owe taxes that have accu­mu­lated for years, do not despair. A tax pro­fes­sional can help you explore legally avail­able options and set­tle you tax liabilities.