Small Business Taxes & ManagementTM--Copyright 2008, A/N Group, Inc.
The IRS has issued Fact Sheet FS-2008-12 with guidance for taxpayers who have missed filing one or more returns.
Why file a tax return?
Taxpayers are required by law to file an income tax return for any year in which a filing requirement exists.
There are numerous practical reasons to file tax returns. Important programs like federal aid to higher education require applicants to submit copies of tax returns to qualify for loans. Lending institutions also may require copies of filed returns for buying a home or financing a business.
And the filing of tax returns can have a tremendous impact on your future. A person's lifetime earnings as reported to the IRS and the Social Security Administration are the basis for Social Security retirement and disability benefits as well as Medicare. Reported income is also the source for state benefits such as unemployment compensation and industrial insurance.
What happens if you do not file?
Not filing a federal tax return can be costly--whether you end up owing more or missing out on a refund. The IRS may also impose a wide range of civil and criminal sanctions on persons who fail to file returns.
If you owe tax and your return was not filed by the due date, including extensions, you may be subject to the failure to file penalty, unless you have reasonable cause for not filing. If you did not pay your tax in full by the due date for the return, not including extensions of time to file, you also may be subject to the failure to pay penalty, unless you have reasonable cause for your failure to pay. Additionally, interest is charged on taxes not paid by the due date; even if you have an extension of time to file. Interest is also charged on penalties.
The IRS continues to identify people who have a filing requirement but have failed to file a return.
By law the IRS may file a substitute return for you if you do not voluntarily file. A series of letters is first sent explaining the possible action IRS may take as part of the Substitute for Return Program.
If you do not file a return or otherwise indicate disagreement such as by requesting to exercise your appeal rights, the IRS will file a basic return for you. An IRS-prepared return will not include any of your additional exemptions or expenses. The IRS will compute the tax liability and send you a bill for the tax that will also include interest and penalties.
If a substitute return has already been filed for you by the IRS, you should still file your own return to claim any additional items. The IRS will generally adjust your account to reflect the corrected figures.
What are the consequences of not filing a tax return?
Here are some things to consider:
What should you do?
Regardless of your reason for not filing, file your tax return as soon as possible. You can contact a tax professional or the IRS for help with filing delinquent returns.
If you are unable to fully pay any tax due on the late returns, do not let this prevent you from filing as payment options may be available. For more details, ask your tax professional or an IRS representative.
Filing tax returns and paying the correct amount of tax is good citizenship. Conscientiously discharging this duty contributes to our nation's well being and provides peace of mind. And failing to file returns can jeopardize a family's financial security and future.
For more information on how to file a tax return for a prior year, visit the IRS Web site at IRS.gov, call the IRS Tax Help Line at 1-800-829-1040 or visit your local IRS office. For tax law and account questions, call 1-800-829-1040. For business and specialty tax questions, call 1-800-829-4933.
Note that many of the same rules apply for state returns. Most importantly, you could lose your refund and the statute of limitations never begins to run. But you could lose other benefits, depending on state law.
Copyright 2008 by A/N Group, Inc. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The information is not necessarily a complete summary of all materials on the subject.--ISSN 1089-1536
--Last Update 02/11/08