Are you behind on your U.S. taxes? Semaphore can help file back tax returns, so you can sleep well again at night.
Every year, the Internal Revenue Service (IRS) gets more sophisticated in improving their methods of identifying delinquent tax filers. Regardless of the cause of your back-tax filing problem, you need to take this problem very seriously and file the back-year tax returns before the IRS does it for you.
Tax returns serve a variety of purposes. You will need them to apply for student financial aid, a mortgage, or a loan. In addition, it’s important to know that your future Social Security, Disability and Medicare benefits are based on your reported earnings.
With the increase in numerous controversial issues being targeted by the IRS, more and more taxpayers are coming forward to take care of their tax evasion obligations for past years’ taxes.
What Are Delinquent Taxes?
To put it simply, delinquent taxes refer to any amount of tax debt owed to the IRS. When there’s a delinquent account, it means that due date for the tax return and whatever established liability has passed and the amount owed remains unpaid.
Tax information is tricky, however, and the repercussions for failing to file or pay can be substantial. Fortunately, you have options when your delinquent taxes become a problem or if you are facing a tax audit.
If you have delinquent tax returns or are a non-filer, there are several areas where you are at a disadvantage. If you have multiple delinquent tax returns, most of which show balances due, and one or two with refunds, if you fail to file those with refunds for 3 years- the refunds will be lost. The IRS will come after you for those with balances due, but you won’t get the refunds or be allowed to use them to offset the balances due. In fact, millions of dollars are forfeited each year by unknowing taxpayers who waited too long to file their old tax returns. The IRS takes the delinquent taxpayers’ funds and turns them over to the Treasury.
Also, delinquent tax returns affect the IRS collection status. The IRS has 10 years to come after you for a tax debt, but that 10-year period begins after you file the returns or the IRS computers prepare them for you, which is never in your best interest.
How to File Back Taxes?
- Gather important documents: For each year that you have failed to file a federal tax return, make sure you have your W-2 or Form 1099.
- Locate any missing paperwork: A copy of your income information can be requested by your employer.
- File your back taxes using the necessary forms: Taxes for previous years will need to be filed using instructions from that tax year.
- Submit your forms to the IRS: Once the necessary forms are received by the IRS, you are fully responsible for paying what is owed. You will receive a bill with the exact amount due, including any interest charges that have accrued.
What Happens If You Don’t Pay Delinquent Taxes?
Technically, not paying your past due taxes is considered a misdemeanor which you can be fined up to $25,000 for each delinquent tax year that remains on record. You could even be sent to prison for a maximum of up to a year! However, this is unlikely as the IRS would rather collect their money than go to those extremes. If you owe money, you might be surprised at their willingness to work with you if you come forward responsibly.
Note, penalties and interest will accrue on top of the outstanding amount. Once the IRS decides that your taxes are “delinquent,” they’ll start tacking on penalties that will worsen the longer the outstanding amount remains unpaid. The order of the process then progresses if you do not pay the amount or respond to letters or notices that your account has changed to delinquent. A Revenue Agent is then assigned to audit your specific account on behalf of the IRS and they’ll reach out to you in order to resolve the issue.
Just because the IRS has not contacted you does not mean they have missed your failure to file. Eventually, the IRS will prepare your return based on what is in the best interest of the government, usually with none of the deductions you are entitled to.
The only deductions you’ll be entitled to are standard deductions and one personal exemption. You will not get credit for deductions such as exemptions for spouses, children, mortgage interest and real estate taxes on your home.
A tax warrant basically establishes a lien against personal property, or any asset that could be used to pay on the debt owed. This includes property of any sort, automobiles, wages, and even bank accounts. Once the case is filed, it then becomes legal for the IRS to take your property or put a hold on your bank account – have the power to go as far as to take the money from the bank themselves after a respective amount of time has passed.
If you are a someone who is delinquent on your U.S. tax filings (whether intentionally or not), you may be exposed to certain IRS penalties especially if you owed tax during any of your delinquent years. Ultimately, the penalties will depend on your particular situation as they operate on a case-by-case basis.
Since this is a serious matter, you should take initiative. If you wait until the IRS comes after you, it might not be at the best time. You may have obligations you want to pay that the IRS won’t allow you to pay. If you take initiative by getting your records and finances in order, you have the advantage.
Once you miss your payment, the IRS will send you a letter. Things can get ugly from there if you don’t act fast. There’s no limit on how long the IRS can go after you for not filing and paying your taxes.
What If You Don’t Have the Money?
Generally, the IRS is not going to destroy your financial situation because you do not have the money to pay your taxes. With a professional and the right course of action, the IRS will work out an agreement with the delinquent taxpayer that works for all parties involved.
The IRS is more hospitable to people who come clean and file their back-tax returns on their own without having to be hunted down and forced to comply.
At Semaphore, We Rescue Troubled Taxpayers.
Don’t let the fear of owing the IRS prevent you from filing your return – there are several options if you owe.
Semaphore can assist you after you complete the first steps which is gathering and locating your paperwork. We’ll research all the background information that is available on your account which includes all wage and income information that has been reported to the IRS and help you identify what other information may be needed for your return.
Rather than miss a single year, you should hire a professional tax advisor who can review your records and file the missing returns for you. When you rely on a professional, you can be assured that your returns will be filed correctly and that you will receive deductions to which you are rightfully entitled. These deductions could greatly minimize your tax penalties.
What Are Some Ways to Ensure Avoiding Being a Delinquent?
For one, know your tax deadlines. As a taxpayer it is your duty to not only pay taxes but to also know the responsibilities that you have. If you haven’t filed before, filing electronically is greatly recommended as not only is it easier, but the systems used can often flag mistakes that would have otherwise been sent through.
Rule of thumb:
- Open all mailed documents from the IRS. If you are receiving something via mail, chances are it is highly important.
- Keep track of everything. Always keep records of what you are filing.
- Notify the IRS of any address or contact changes. Even something minor sent to an incorrect address can become a nightmare to deal with as it goes on to accrue penalties and interest simply because your address has not been updated in the system.
If you don’t have all of the information you need to file, you’ll have to make your best guess when it comes to income, deductions, filing status, and so on.
Tips for Dealing with Back Taxes:
- Contact the IRS and a tax professional immediately if the IRS has already started contacting you to collect.
- Understand your rights and options – you may have more possibilities and payment option than you think.
- File even if you can’t pay. The failure-to-file penalty can be ten times as much as the penalty for failing to pay.
- Save your receipt for proof that the return was delivered.
- Don’t make the mistake of thinking you shouldn’t file the current year’s taxes because you failed to file last year. The IRS will hold you responsible for each delinquent tax return.
- Determine if a Substitute for Return (SFR) has been filed for any of the years that you are delinquent, you should review the statuses and make sure you get the exemptions you are entitled to take.
Special Circumstantial Cases
There are some circumstances in which the IRS might waive your penalties (but you’ll still have to pay what you owe). You need to prove “reasonable cause.”
Some common situations that might prove reasonable cause include:
- Death (family member or someone close to the taxpayer)
- Unavoidable absence of the taxpayer (rehab, prison, held hostage in another country)
- Destruction of the taxpayer’s place of records (fire, flood or any other casualty)
- Taxpayer’s ability to make deposits or payments had been materially impaired by civil disturbance (divorce)
- Incorrect advice from a tax professional
- Bad advice received directly from the IRS (over the phone, in writing or in person)
- Mental illness
- Extended service in the military
All in all, a “one-size-fits-all” approach when it comes to these matters simply doesn’t work. Therefore, if you’re behind on your taxes, we strongly suggest that you speak with a qualified professional who will listen to the facts of your specific circumstance and then advise you on the best filing strategy for catching up on your past due taxes.
Peace of mind and good night’s sleep is still well within reach – get the peace of mind you deserve by having the tax experts at Semaphore help you get back into tax compliance.