Another year of not filing your taxes comes around and we're all seeing the April 15 ads pop up online, on TV and on the radio.
Perhaps it's time to review what is the bare minimum of tax compliance the IRS is looking for you to achieve and what practical considerations come into play, whether you are an individual or business.
1. Individuals should file six years of 1040 forms. The IRS rarely asks for returns older than six years ago and won't bicker with an individual that submits six.
2. But what if you are going to owe taxes? If you are going to owe and can't pay the taxes, you should file all six if you ARE going to owe and negotiate an installment agreement, penalty waiver or make a settlement on what you owe. If you can pay the taxes, you can file the six or some self employed people might consider filing less (perhaps the last two or three tax returns) and paying all taxes and penalties due. It's quite possible the IRS would be satisfied with payment of those two or three electronically filed returns.
3. Partnerships (or Multi Member LLCS), S corps and C corps likely should file all unfiled returns. Because the balance sheets of business entities have continuity from year-to-year, it makes sense to file all of the needed years. However, if you aren't attached to your business entity and don't mind losing the tax benefit (less self employment taxes), you can stop operating as a corp/partnership and file your business returns with your individual returns (as a 1040 - Schedule C sole proprietor).
4. Paper filing? Make sure you get tracking info. The IRS has been having a hard time during Covid processing paper returns.
5. Definitely electronically file if it all possible the last three or four years of returns. This will guarantee that your returns are processed quickly by the IRS. Most tax professionals like WATAX will be able to do this for you.
