An Entrepreneurial Approach to the Law

Unfiled Tax Returns

We all know that taxes are due on April 15th each year, right? But sometimes, for whatever reason, they just don’t get filed.

Blank 1040 & penWe plan to get around to it eventually, but sometimes it just doesn’t happen. Years can go by, and once we miss one deadline it seems easier to rationalize missing another one.

Some people believe that if they owe additional taxes it will be better to not file a tax return so that the IRS doesn’t notice.

There is just one problem: The IRS notices.

The IRS has a sophisticated computer system that will find out if you filed a return or not. Maybe you’ll get away with it for a few years, but the IRS will catch up with you. Did you know that it is actually a crime not to file a tax return when you owe money to the government? Thankfully, the IRS rarely prosecutes these cases, but it will get increasingly interested in your unfiled tax returns.

If You Don’t File, the IRS Will Do It For You

The IRS cannot handle a vacuum. If you don’t file a tax return, it will eventually file one for you. These filings are called SFRs, standing for “substitute for return.” When the IRS files an SFR, it only takes one exemption (even if you’re married, have kids, and qualify for more). It takes no deductions and it submits an SFR that makes it look like you owe the maximum amount of tax possible.

To make matters worse, if you don’t pay the amount that the IRS says that you owe in the SFR it created for you then it will begin taking enforcement actions against you to collect the tax debt. This can mean tax levies, tax liens, and lawsuits. But when it takes these actions, it is no longer trying to collect the tax that you originally owed, it is now trying to collect the higher—and often much higher—amount that the SFR says that you owe.

Better Late Than Never

Thankfully, there is usually an easy solution: file your tax return. File it even if it is years late. File it even if you know that you owe money because the amount that you actually owe is almost certainly less than what the IRS is now trying to collect due to its inflated SFR amount. Just file it.

We have one other suggestion: don’t do this alone. When you work with a tax attorney, your conversations are protected by the attorney-client privilege; this is NOT the case with your local retail tax outlet. The attorney-client privilege means that you can explain your situation without worrying that your tax preparer could be questioned by the IRS. Only attorneys have this protection when it comes to criminal matters. A number of unsuspecting taxpayers have poured their hearts out to tax preparers only to find their preparer testifying against them in court after being subpoenaed by the IRS.

Let us take this burden off of your shoulders. We can file your back tax returns for you and work with the IRS to minimize the amount that you owe.

If you are concerned about unfiled tax returns, contact a tax attorney today.