The Truth About Failing To File Tax Returns
While we spend so much time on education, a large number of people are still not sure how to handle their taxes. Accounting seems like this bizarre task that people have to get through and hire others to assist them with but barely understand anything about. However, getting through the taxation process is quite challenging, but is mandatory, and someone has to handle it, or the person in question could get in trouble with the law.
Often taxpayers can suffer from events in their lives which can make the filing of tax returns a low priority. Adverse events like the death of a loved one, illness or failure of a business are so catastrophic that filing returns and paying the related taxes take a back seat to more pressing concerns.
We have noticed that the COVID-19 pandemic has put a lot of these issues at the forefront, making the payment of taxes seem like it is not a requirement in the short term. Before taxpayers realize it, the deadline for that year’s taxes has passed without filing, and if it is a big enough calamity, another year passes and another and another.
After many years have passed, getting started again can be quite challenging. Taxpayers would not know where to begin to resolve the issue, which usually implies that they need help.
The initial misconception regarding failure to file returns is where to begin. The IRS, state and local agencies are concerned, at first, with what taxpayers are doing about the problem. They first want to see taxpayers making estimated payments for the current year.
The next misconception (and perhaps the biggest one) is that they have to file returns for all the missed years. Current IRS policy calls for filing the most recent six years, even if more years are outstanding, which is only if the taxpayer has a liability for the filing of the return.
Another misconception is wondering what the IRS wants first?
The question often causes these taxpayers to be reluctant to come forward. If they can’t make estimated payments for the current year, the IRS will not allow them to make a permanent resolution for the prior years. Taking care of the current year upfront also helps establish good faith with the government. Taking care of all the previous years may seem so daunting that taxpayers will feel helpless. If the number of years is limited to six, with a taxpayer having a liability to file their taxes for all those years, the taxpayer can find competent and reasonable evidence to support the disclosure made on those returns. Resolving tax issues then becomes a reasonable and attainable objective.
If these taxpayers settle with the IRS on a balance due that is more than they can pay, there are solutions available. The IRS usually has ten years to collect back taxes after they assess them. An alternative to deal with this is an offer in compromise, although these offers are sometimes difficult to obtain. Low-income taxpayers can try to get a currently not collectable status where they do not presently have to make any payments. IRS will notify these taxpayers every two years to see if they improved their financial status. Partial payment instalment plans are available where the IRS will determine how much income the taxpayer can afford to pay during the ten years. These plans often end up with the taxpayers only paying a portion of the total owed.
If you need help with accounting or your taxes, get in touch with John P. Jones Inc. I am a certified public accountant in Chicago, IL providing services like Tax Preparation and Planning, Business Accounting, Strategic Planning, Tax Resolution Services and Retirement Planning across Park Ridge, Oak Park, Cicero, Lincolnwood, Evanston, Kilbourn Park, Chicago IL. I have been in the accounting game for more than three decades and have been working with clients across different industries to assist with their various needs. I work with individuals as well as small companies, whether in person or remotely. If you are looking for a greater understanding of the services I provide, please click here. If you want to get in touch with me, please click here.