Every year there are between 10 million and 15 million people who do not file their taxes for a variety of reasons. Many of these people do not have to worry about filing because they make under the incoming limits for their filing status. However, if you have earned over $400 a year self-employed in the past few years, then you have to file all your back taxes or the IRS can penalize you. The income limit requiring you to file your taxes changes every year if you are a W-2 employee working for someone else, usually ranging from $400 to $800 per year. To find out if you are required to file your taxes, you need to find out the minimum income for filing that year, using your filing status and age.
About a quarter of the people who have not filed their taxes, but are required to, would be surprised to know that once they file, if they qualify for certain conditions they will even receive a tax refund. Every year there is a list of 1040 instructions describing the new laws and necessities for filing your federal taxes provided by the IRS. The laws about your state income tax returns are updated every year while changing from state to state. If you are worried about tax problems and having to file old unfiled tax returns then finding all the information you need by having a tax professional helping you will help relieve your uncertainties.
Some Problems Caused by Unfiled Tax Returns
Since there are billions of unpaid back taxes owed by taxpayers the IRS is very severe in their tax laws. Failing to file your federal and state taxes can result in many unwanted penalties including the IRS failure to file penalty. These penalties can include extra interest on any back taxes owed, extra fines and even liens on your business and home. The fines and interest are usually large, but sometimes if you have a qualified tax attorney, you can get the IRS and State to work with you on payment arrangements if you owe back taxes.
Reasons a Taxpayer May Have Unfiled IRS Tax Returns and State Returns
There is an assortment of reasons that a person may not have filed their previous years of taxes. Some people are not sure of the income limits that require you to file your taxes, thinking they make less than the required amount when in reality they are earning over the threshold. Some are not sure that they need to file when they have income from casinos and investments but there is also an income ceiling for filing on those types of earnings. Other taxpayers think they do not have to file tax papers if they have the appropriate taxes withheld from their checks through payroll or claimed through vendors for business owners. However, not filing in these cases can cause a taxpayer to gain substantial tax debt. Others may choose not to file their back taxes because they fear the cost from the IRS.
Consequences of a Delinquent IRS Tax Returns
The starting IRS failure to file penalty is 5% of your due amount each month, maxing out at 25% of your total tax owed, and this don‘t even include the fines they may charge. The IRS can seize your assets making it impossible to access your bank accounts or business funds. They can also garnish your wages or levy your Social Security as a way to bring the taxpayer into compliance. These penalties stack up putting the taxpayer deeper and deeper into debt.
Unfiled State Tax Return Penalties
There are no set penalties for state taxes since they vary for each state. Most states charge fines and interest on the taxpayer’s debt. States also can do tax levies and tax liens on your home and business or freeze your bank accounts. A taxpayer may even be charge in court with tax crimes risking criminal penalties and a record because of delinquent state tax returns.
The Next Step
Now is the time to take the next step in resolving your unfiled income tax returns. An experienced tax attorney can help you avoid some penalties and resolve your tax debt problems. These attorneys are skilled professionals at tax laws and codes. They can negotiate with the IRS and state on your behalf to come up with the best financial resolution to your problems.