Awards & Recognition
Realizing that you made a mistake on your taxes can be an anxiety-inducing experience. When you realize that your mistake was simply that you forgot to file your taxes, your anxiety may mix with a tinge of embarrassment and now are in need of help getting caught up on tax filings you missed. In any case, your biggest concern is likely twofold. First, you are concerned about how much this filing error will likely cost in fines and penalties. Second, you simply want to know how to go about fixing this filing error in a way that mitigates or at least does not exacerbate the tax consequences faced.
Unfortunately for absent-minded taxpayers, up to 20 percent of the tax gap is attributed to the non-filing of taxes. As such, the identification and prosecution of taxpayers who fail to file when they have an obligation to do so is a priority for the IRS and U.S. government. Also the state of California is far more likely to criminally prosecute simple non filing that the fed is. Taxpayers who fail to file can face significant penalties for their noncompliance. However, taxpayers who are proactive and make good-faith efforts to correct their past filing errors may be able to reduce or eliminate the penalties they owe and any potential criminal tax exposure surrounding non-filing.
The Consequences of Failing to File
Taxpayers who do not file their taxes, are ineligible to receive any tax refund they may be entitled to receive. Furthermore, taxpayers who do not file their return within three years of its original due date will lose any right to claim an available tax refund. Thus, even prior to considering the potential penalties and other negative consequences that can be imposed for non-filing of taxes there is already good reason as to why nearly all U.S. taxpayers should make their annual filings and work towards getting caught up on tax filings.
Taxpayers who fail to make a timely income tax return filing can face a failure to file penalty. The penalty is assessed at five percent of the unpaid tax bill for every month or part of a month where the obligation remains unsatisfied (maxes out at 25% after just being late 5 months). A failure to pay penalty can also apply. Furthermore, taxpayers who fail to make their own tax filing can have their taxes filed on their behalf through a substitute return (IRS) or proposed assessment (FTB). While the prospect of having the IRS or FTB handle your taxes for you can sound tempting, the fact is the taxing authorities will not figure your taxes to your benefit. In fact, many taxpayers who face this type of situation will be presented with a hefty tax bill because they will prepare your taxes in their favor – not yours by ignoring many available deductions. Combined with the penalties that can be imposed, a simple mistake of falling out of the system can quickly add up to a major tax liability.
Steps to Take to Correct a Missed Tax Filing Obligation
While a taxpayer who is noncompliant with tax obligations should strive to correct the problem as quickly as practicable, every tax situation is different and most taxpayers would be well-served by meeting with a tax professional prior to filing. Meeting with a tax professional can help you understand your level of risk in coming back into compliance with the U.S. and state Tax Code. For taxpayers who simply forgot a filing deadline, filing expediently may be sufficient. But for taxpayers who may have additional offshore tax issues under FBAR or FATCA, merely filing the missing tax returns may be insufficient and thus potentially subjecting the taxpayer to significant civil and or criminal liability. In the case of an additional offshore disclosure issue, a taxpayer is likely better served by engaging in the full blown or streamlined Offshore Voluntary Disclosure Program (OVDP) or other programs that provide greater insulation and protection than would be provided through a quiet disclosure.
In the absence of additional tax issues, a taxpayer should file his or her missing return or returns as quickly as possible. It is imperative that the returns filed are true accurate and complete as non-filers face increased odds of facing an audit and one must be careful not to compound the exposure from non-filing with the exposure to income tax evasion charges upon attempting to become compliant. Furthermore, if the taxpayer owes money to the government, he or she should pay as much as possible, as soon as possible. Since non-filing and non-payment penalties are based on the amount of tax due and owing, reducing the outstanding balance will also reduce the amount of penalties that can be imposed. An additional consideration that can be contemplated with the assistance of a tax attorney is whether the taxpayer’s failure to file or pay was due to reasonable cause. Reasonable cause for the delay can result in the waiver of fines and penalties.
We Can Help Getting you Caught up on Tax Filings
If you have failed to file taxes or have concerns about an incomplete filing, the experienced Los Angeles tax attorneys and CPAs of the Tax Law Offices of David W. Klasing can help getting you caught up on tax filings. Our lawyers work to mitigate the potential civil and criminal consequences faced by the taxpayer while he or she comes back into compliance with the tax code. Our CPAs ensure that if the client faces an audit the taxpayer’s tax returns will withstand any level of governmental scrutiny. To schedule a reduced-rate consultation to discuss your tax options call 800-681-1295 or contact us online.
