Each year, taxpayers are required to file a tax return with the IRS, reporting all income and paying any taxes owed. However, for various reasons, many well-meaning taxpayers fail to file their returns. This can lead to significant penalties and interest, and it can also prevent the IRS from offering solutions for most tax issues. Therefore, it is crucial to file any overdue returns.
Challenges of Filing Unfiled Returns
Filing unfiled returns often requires more expertise and strategic planning than filing on time. If you haven't been contacted about a missed year and it's over six years old, the general rule is not to file. The IRS typically does not pursue taxes due on returns more than six years old, unless there are exceptions. Filing an older return could inadvertently open you up to paying taxes the IRS might otherwise have forgiven.
However, the IRS can still require returns for those older years.
Compliance Requirement
To resolve any tax debt with the IRS, you must be "compliant," which means filing all overdue returns for the past six years. Filing these returns differs from filing on time. If you know you won’t be able to pay what the IRS thinks you owe, it may not be worth the effort to gather all your old records and receipts to substantiate your expenses.
Attempting to lower the amount you owe by claiming expenses may lead to more scrutiny. The IRS tends to closely review older returns, especially those that include expenses, which increases the likelihood of an audit or rejection of your claimed deductions. Accurate filings are crucial, with proper documentation to support your expenses.
Timing and Filing Location
For taxpayers facing an immediate threat of levy or other IRS actions, filing may be necessary to prevent such actions. It is important to file the return quickly and at the correct location. Depending on your specific circumstances, deadlines and filing locations may vary.
Need Help Filing?
If you're in the Dallas area and need assistance filing unfiled returns, contact us for expert legal help.