If you are a non-filing taxpayer, it’s important to know the steps to take to become current with your tax return obligations. There are many things to consider when going forward and filing returns that are past due. The longer you wait to file your returns, the more interest, and penalties you will accrue. The best time to become current is always as soon as you possibly can.
Proving Your Income
It is extremely important that you are able to actually prove the amount of income you are claiming on your delinquent tax returns. Delinquent returns should be as accurate and conservative as possible. These returns are going to be under greater scrutiny with the IRS and it’s important that you not take deductions if you cannot prove you are eligible. Better to be extremely conservative and avoid being audited.
Should I File One or All Of My Delinquent Tax Returns?
Legally you are required to file all returns that you did not file in the past. Some attorneys and CPAs will recommend that you only file six years of delinquent returns because of the statute of limitations for prosecuting taxpayers for not filing their return. However, there is no statute of limitations for assessing tax on tax returns that were never filed. That is why it is in your best interest to file all delinquent tax returns as soon as possible. Even though you are recommended to file all delinquent tax returns, some may be harder than others to accurately assemble. If it has been many years and you are unable to honestly and accurately state your income, then it may be in your best interest not to file that return. In these situations, the IRS will investigate your ability to file a specific return and make a judgment call on whether they will require you to file it or not.
The Process Of Filing Delinquent Tax Returns
The IRS is limited to one inspection of your books and records per tax period to determine the correct tax to assess you. This may include additional contact from the IRS to verify information or ask additional questions about a specific part of your return. If your case is already in the collection process and your tax return resolves the issue, further collection efforts will stop. However, the tax will be immediately assessed and interest will begin to accrue. If a Revenue Agent or Officer is involved and they are attempting to collect back taxes from you, make sure they are aware that you have filed your returns. This will show them that you are attempting to become current and will stop them from filing liens and levies against you.
The Revenue Officer will then assign the taxpayer a due date for filing his delinquent return(s). If this deadline is not met, the taxpayer is considered to have willfully not filed his tax returns. In situations where the taxpayer is not filing their returns like they are requested to do by the IRS, their case may be forwarded to the Examinations division or the Criminal division of the IRS.