What to Do When You Forget to File Taxes
When people realize that they forgot to file their taxes, their first instinct is often to panic. There are many ways a person or small business owner can make mistakes regarding their tax filing and obligations. The taxpayer may stress over how they could have possibly made this simple error. So now you need to know what to do when you forget to file taxes. The taxpayer may panic about the consequences the failure to file may have on their finances, taxes, and other concerns. Some people may worry about the IRS penalties and fines they will have to pay over the amount of tax already due and owning.
What Penalties Can I Face for a Failure to File My Tax Return?
Some individuals may be surprised to find that nearly all Americans have an obligation to file and pay taxes. While some people may protest that they can’t possibly make enough to have to file, the reality is that the levels of income one can earn before a tax filing obligation is triggered is extremely small. For a sole filer in the 2014 tax year, an obligation to file taxes begins at a mere $10,150 in income. While married couples filing jointly and senior citizens can earn more, it is not significantly greater. Taxpayers with income at this level or above must file their taxes every year by the April 15 tax filing deadline.
Taxpayers who fail to file their taxes by the annual deadline and who do not file a request for an automatic filing extension in a timely manner are subject to failure to file penalties. If the taxpayer had a tax bill that was due and owing and failed to make payment, a failure to pay penalty can also be imposed. The failure to file penalty is assessed at a 5 percent penalty on the amount due and owing for each month or part of a month where the obligation remains unsatisfied. For instance, if you fail to file taxes until June 15, you will owe a penalty for the months of April, May, and June because June is a partial month.
What Should I Do to Correct My Failure to File
The truth is that there is no such thing as one-size-fits all advice for tax situations. Each and every tax issue is unique and subject to different concerns and circumstances. Thus, while a taxpayer should proceed with his or her investigation of the issue in a diligent manner, consulting with a tax professional who can assess the situation and its risks is often essential.
Consider the situation of two taxpayers who are identical in every way, including their failure to file taxes, expect one taxpayer holds a significant number of undisclosed offshore accounts. While both taxpayers face risks due to their noncompliance, the taxpayer with foreign accounts that have not been disclosed through FBAR or FATCA faces a significantly more sensitive situation. Provided that additional red flags are not discovered, the first tax payer’s situation may be able to be resolved through filing the missing tax returns or potentially up to 6 years of returns alone.
However the taxpayer with undisclosed foreign accounts and unfiled taxes faces significantly more danger. Aside from the fines and penalties that can be imposed for FBAR and FATCA noncompliance, a government agent may perceive the non-filing of taxes as a step to further the concealment of offshore accounts and income. The taxpayer may be referred for criminal investigation and prosecution. The use of a quiet disclosure in these circumstances is inappropriate and likely to further exacerbate the consequences faced by the taxpayer. Thus in this situation, a tax professional may recommend entry into Offshore Voluntary Disclosure Program (OVDP) because OVDP can provide insulation against further criminal charges stemming from the taxpayer’s offshore non-compliance. This type of situation is fraught with danger for the taxpayer and should be handled by a professional.
Taxes that have not been filed can result in serious consequences for the taxpayer. However, taxpayers who work to fix their IRS tax problems before receiving a notice from the IRS, typically find more favorable outcomes. So what to do when you forget to file taxes? Call us to schedule a reduced-rate consultation with an experienced tax attorney and CPA at the Tax Law Offices of David W. Klasing, call 800-681-1295 or contact us online today.