Although the U.S. income tax filing date is in mid-April, a number of taxpayers do not file their returns on time. If you failed to file tax returns, the Internal Revenue Service (IRS) could impose penalties. If you owe tax for any years in which you did not file, the IRS charges interest on the unpaid amount, in addition to penalties. Eventually, they might take enforcement action, like putting a lien on your property or imposing a levy.
If you missed filing a return for three or more years, and you have an income over $100,000 or must navigate certain complex returns (such as Schedule C or E), seek help from an experienced tax attorney. A Bethesda unfiled tax return lawyer could help you complete unfinished returns, minimize the penalties and interest you must pay, and determine if there is any criminal exposure.
Most people who do not file tax returns are not trying to defraud the IRS. Numerous legitimate situations could arise that result in a taxpayer not preparing or filing their return in time.
A disruption in life or business could cause someone to overlook the tax filing deadline, or perhaps a fire, flood, or other natural disaster destroyed records necessary to prepare a return. A divorce or business dispute might leave a taxpayer unable to access their records or uncertain of their obligations to file a return. Sometimes, a person might receive bad tax advice from an accountant or other professional.
A taxpayer without the money to pay their taxes might not file so they can put off dealing with the issue a little longer. In order to avoid penalties, taxpayers should file their returns even if they do not currently have the money to pay what they owe. A Bethesda attorney could help a taxpayer carefully and properly navigate their unfiled tax returns situation.
When a taxpayer fails to file, the IRS may prepare a Substitute for Return based upon information received by the IRS and mail a letter to the taxpayer with its calculation of the tax owed. This calculation might not include deductions or exemptions the taxpayer is entitled to receive. An individual or business should contact a Bethesda attorney upon receipt of the letter so they can begin preparing the returns for the years in question.
If the taxpayer does not respond within 30 days, there will be another notice informing them that the IRS will begin collection action in 90 days. This could garnish a taxpayer’s wages, put a lien on their property, and levy a bank account to get the funds. Any of these options could impose substantial inconvenience and hardship on a taxpayer.
The IRS will assess 5% of the amount at issue each month the return is not filed, up to a 25% maximum penalty. Interest on the unpaid amount accrues from the due date of the return and compounds daily.
The IRS is often open to resolving the matter if the taxpayer demonstrates a willingness to cooperate. If the taxpayer does not address the unfiled returns before the IRS gets a judgment, levy, or lien, an attorney could still secure an agreement that minimizes disruption to the taxpayer.
The first step is preparing and filing unfiled returns. The lawyer will assess whether the taxpayer must file for every year they missed—in some cases, they might not have to file if they did not meet the income threshold for that year. If the taxpayer has not filed taxes for many years, absent fraud, they will only need to file tax returns for the last six years based on IRS Policy Statement 5-133 as found in Internal Revenue Manual Section 22.214.171.124.18.
Sometimes a taxpayer does not have records for the years they did not file returns. A Bethesda unfiled tax returns lawyer knows how to get the necessary information from the IRS and other sources.
Taxpayers may find they have a large tax bill when they have not filed or paid for multiple years. The IRS provides a few outlets to help a taxpayer satisfy their debt.
Installment agreements are available in many cases and penalty abatement is sometimes an option to reduce the penalties the IRS assesses – though not the underlying tax itself. An unfiled tax returns attorney in Bethesda could arrange for the IRS to forgive part of the balance or deem it uncollectable if the taxpayer is not in a stable financial situation.
Missing a few years of tax filings can slowly build into a larger tax debt that might be difficult to clear up on your own. A Bethesda unfiled tax returns lawyer could analyze your situation and determine the best way to satisfy the debt. Schedule a consultation today and learn how Pontius Tax Law can be of service.
Pontius Tax Law, PLLC is a tax law firm that strives to resolve sensitive tax problems through trust, dedication and value. The law firm was founded by John Pontius with offices in Washington, DC, Rockville, MD, Bethesda, MD, Vienna, VA, and Alexandria, VA. Mr. Pontius represents individual and business clients with sensitive and serious tax matters before the Internal Revenue Service and state taxing authorities. His client base is local, national, and international.
Over the course of his career, Mr. Pontius has represented businesses and individuals with complex tax issues in the following areas: FBAR examinations, offshore and domestic disclosures, FATCA, FIRPTA, tax planning, unfiled tax returns, release of tax liens and levies, trust fund recovery penalty, IRS and state audit examinations, as well as appeals, penalty abatement, U.S. Tax Court litigation, along with defense of tax fraud and evasion. If you require assistance from a tax lawyer, contact Mr. Pontius to discuss your situation.