What to do if you haven’t filed your taxes in the US?
There can be an array of reasons for taxpayers not to file their taxes in the US. For starters, an individual might not have filed their taxes because they cannot pay their taxes. Or the more common reason is that individuals get consumed with life and work and cannot get things aligned to be able to file their taxes on time.
Irrespective of what your reason maybe, it is essential that you file your taxes at the earliest. Simply because non-filing of taxes is a serious issue for the IRS. There are three straightforward outcomes when it comes to filing your taxes. Firstly, you do not owe any taxes to the government. Secondly, the government owes you tax refunds and thirdly, you owe taxes to the government.
While the first and second scenarios are still easy to live by, the third one can take a hefty toll on you. In the event that you owe taxes to the government, you are liable to pay fines and penalties on the top of the taxes that you are liable to pay. And things can get ugly, quite fast.
File your Tax Returns
For individuals who have not yet filed their taxes, they must start immediately. The first question that will come to your mind is, for how many years should I file my taxes. As per the IRS guidelines, you must file your taxes for at least 6 years to establish a good understanding with the IRS.
If there are any changes to the same, the IRS management will have to approve of the same. Depending on the situation, the IRS management can ask you for tax returns exceeding 6 years as well. Here are some of the common reasons for the same.
- If there are relatively larger tax bills on your past filings. The absence of any withholdings for large wages, property taxes or Form 1099-Misc is red flags for the same.
- The IRS would most probably do additional scrutiny if any businesses are involved since the possibility of non-compliance is higher.
Tips For Filing your Taxes
Citizens who have not filed their taxes and wish to do so, here are some tips that will help you get through.
- It is essential to get a confirmation whether the IRS needs 6 years of taxes or beyond. You can either call the IRS to find out the same or reach out to a tax consultant for the same.
- One more reason to file your taxes at the earliest is that the IRS will not pay older tax refunds. As per the IRS guidelines, it will pay refunds up to a maximum of 3 years from the date of filing. Thus, you might lose any refunds even if they are valid.
- There is a good possibility that you might have to pay hefty fines on your taxes. The failure to pay and failure to file penalties can accrue up to 47.5% of your liable taxes.
- The IRS usually starts a process called the substitute for return, if the due date exceeds three years. When you file your taxes, the IRS will compare your returns with the SFR (substitute for return). And this can be time consuming, sometimes these cases might take up to four months.
- In the event you cannot pay your liable taxes, it is recommended that you reach out to the IRS and ask for an agreement. Depending on your needs, there are several typesof agreements that you can opt for.
Irrespective of your reasons, if you haven’t filed your returns, you must initiate the same at the earliest to minimize its impacts.