Why didn't you file your tax returns?
- You knew you were going to owe taxes and feared the consequences, so you didn't file.
- You couldn't find the records to do them and the years compounded.
- You got divorced, your "ex" was the filer, and now you're lost.
- Your accountant died and you panicked and stopped filing.
- You have so many years to file that you're absolutely paralyzed with fear and inertia.
- You're afraid that investigating your situation with the IRS will stir up a bee's nest.
Why should you file your tax returns?
- It's the law; not filing a tax return can be a felony.
- It's hard to live an adult life as a non-filer. Buying or refinancing a house usually requires that you have filed your returns, for example.
- If you want to get married, not filing might be considered a deal breaker to a future spouse.
- The IRS might file substitute-for-returns for you without deductions and you'll owe more taxes than if you'd filed them yourself.
- Traveling outside the U.S.: if you haven't filed tax returns, the federal government might not issue you a passport. (In fact, as of legislation passed in November 2015, if you owe the IRS $50,000 or more your passport will be revoked.)
- If you're self-employed, you might be missing out on increased Social Security contributions for when you retire.
- To get health insurance on a health insurance exchange or healthcare.gov, which require you to have filed.
- You might need to file your recent tax returns to get student loan aid for your kids (FAFSA).
- To reduce your vulnerability to identity theft. Our recent observation has been that 50% of multi-year non-filers have experienced a malicious attempt to intercept their refund and/or file under their social security number.
Do you need to file every single year?
In almost every case we see, no, you do not need to file every year. The IRS generally wants to see the last seven years of returns on file. But it really depends. Certainly if the IRS filed for you, you'll want to replace the Substitute for Returns with returns of your own to reduce the balance they assessed. If you're getting refunds and won't owe taxes, you can focus on the last four years only 2013 to 2016 (as the statute of limitations prevents refunds beyond 3-4 years.)
How do your tax professionals at Washington Tax Services handle this for you?
First: Research and Analysis
We get thorough information on your tax situation, but tread very lightly by posting Power of Attorney for you and researching your record online. By acquiring your tax info online, we avoid any contact to a live person at the IRS and possible flagging of your situation.
Second: Make a Determination, Order Records and File the Returns.
We'll determine the amount of years that need to be filed. All of the IRS records will be faxed to our office or we will download them off the IRS e-services website.
Third: What if the IRS Filed For You and You Owe Money?
There are cases where the IRS filed for you—creating balances due—and you're likely going to be a hardship or Offer in Compromise (OIC) candidate. In these scenarios, we might not file the returns as it's a waste of effort; you're going to settle with them anyway so why bother?
Fourth: Address the Balance Due
Once we determine what is owed, we either a) prepare an Offer in Compromise to settle the debt, b) determine hardship status or c) work out a livable installment agreement.
Fifth: What If You Are Getting Refunds?
Before April 15, 2017, you will receive tax refunds for the years 2013, 2014, 2015 and 2016 if you are entitled to them. After April 15, 2017, you will lose the 2013 refund as the statute of limitations prevents refunds after three years.
Sixth and Finally: Creating a Template For Future Compliance
So, how are you going to avoid tax problems in the future? Setting up a corporation? Remaining a sole proprietorship? Handling the bookkeeping via QuickBooks? We promise to assist you so you never run into a tax problem, breaking the non-filing habit once and for all.
Is 2017 the year you finally solve your tax problem? Go for it! Give the staff of Washington Tax a call at 1-888-282-4697 or email a description of your tax situation and we'll call you.