Filing an income tax return is an integral aspect of our civic responsibility
If the taxpayers have not filed their federal income tax return for the tax year or for the previous years, then they should file their returns at the earliest. Else they must provide the reason for not filing the returns.
Consequences of not filing Income Tax return within the due date:
If taxpayers fail to file their Income Tax returns by the due date and do not file the extensions on time, they will face the following consequences.
- A failure to file a penalty may be imposed on taxpayers unless they have a reasonable cause for their failure to file the returns timely.
- Loan approvals may be delayed if the taxpayer hasn’t filed their return. For instance, mortgage lenders and financial institutions require income verification including copies of filed tax returns, while buying or refinancing a home, applying a federal aid for higher education, getting a loan for business, etc.
- Unless the taxpayer has a reasonable cause for their failure to file the tax returns timely, failure to pay the taxes in full by the original due date of the tax returns may result in a penalty.
- Even if the taxpayer has filed an extension of time to file the returns, the IRS may levy interest on taxes that are not paid by the original due date. Tax authorities expect the taxpayer to pay the taxes in full and on time. Failing may incur penalties for taxes, and the interest will start accumulating on the penalty as well.
There is no penalty for failing to file the returns if the taxpayer is due a refund. But the taxpayer risks losing a refund altogether if they claim a refund after the statute of limitations has expired. Taxpayers should file an original return claiming a refund within three years of the due date. After the three years period, the refund statute will prevent the issuance of a refund check and the application of credits, including the overpayment of the withheld or estimated taxes to the other tax years, for which the taxes are underpaid.
Filing back tax returns with the IRS:
The IRS requires that taxpayers file six years of back tax returns, so as to be on good terms with the IRS. The following are some important points to note, for those who are filing back their tax returns.
- Call the IRS or a dedicated tax professional to confirm the number of unfiled tax years.
- The IRS will only entertain refunds for returns filed within three years of the due date of the return. And taxpayers cannot claim older refunds.
- Prepare an accurate transcript that matches the IRS records.
- Be ready to pay hefty penalties. Penalties generally accumulate over time, sometimes up to 47.5%.
- If the taxpayer owes taxes to the IRS, they can get into a payment agreement with the IRS.
E-file IT Return With Tax2efile:
If you want to file your returns and pay your income taxes with the IRS after a few years of non-compliance, you can sign an authorization and help your tax pro at Tax2efile to get the required transcripts and information for you. You can also allow your tax professional to handle the entire issue with the IRS.