Taxpayers “Failure to File” penalties are costly
Taxpayers fail to file their tax returns for many reasons, yet here are four very good reasons to file your current tax return and any past year returns:
1. Avoid interest and penalties: Yes, the IRS will assess you with a penalty for “Failure to File” your tax return and interest will accumulate daily on the penalty amount still outstanding. This interest does not include any interest accrued on the amount of tax liability unpaid. That separate penalty is called “Failure to Pay”.
2. Claim a Refund: If you are due a refund on the tax withholding for the year your return has not been filed, you risk forfeiting your refund after the three-year statute of limitations has expired. In addition, you lose out on any allowable refund on the earned income tax credit.
3. Protect your Social Security Benefits: If you are self-employed and do not file your federal income tax return, any self-employment income you earned will not be reported to the Social Security Administration and you will not receive credits toward Social Security retirement or disability benefits.
4. Avoid issues when applying for a loan: Loan approvals may be delayed if you don’t file your return. Copies of filed tax returns must be submitted to financial institutions, mortgage lenders/brokers, etc., whenever you want to buy or refinance a home, get a loan for a business, or apply for federal aid for higher education.
When you fail to file, the IRS will file a substitute return for you. This return will not give you credit for deductions and exemptions you are entitled to receive. The IRS will send you a Notice of Deficiency CP3219N (90-day letter) proposing a tax assessment. You will have 90 days to file your past due tax return or file a petition in Tax Court. If you do neither, the IRS will proceed with the proposed tax assessment.
An Enrolled Agent will not only address your past due tax returns, but I will be able to address the assessed penalties and interest as well. Contact me today for a consultation.
