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.
Unfortunately idle speculation and worry over the tax obligation will not make it go away or bring you any closer to a potential solution
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.
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.
What to Do If You Forget to File Your Taxes
Failure to file tax returns or pay necessary taxes can lead to serious penalties, including criminal charges, if not resolved. Most of the time, you can be successfully brought back into compliance without facing criminal tax charges if you quickly reach out to a skilled Tax Lawyer like those at The Tax Law Offices of David W. Klasing. Even better, if you reach out to our experienced dual licensed Tax Attorneys and CPAs before you file your domestic or international entity or personal taxes, we can do a thorough accounting of your books and records to make sure you file complete, accurate and true returns as your odds of facing an audit are exponentially elevated when you have fallen out of the system and are filing several years of tax returns to get back into compliance. We can also help you file for an extension if you are not going to be prepared to file on the original return due date.
If you have already failed to file or request an extension our lawyers know how to deal with the situation in a manner that will minimize the potential civil and criminal penalties, you might face for your past mistakes or intentional actions. In some situations, we may be able to convince the IRS to waive the civil penalty and simply let you file your returns late, especially if your facts are Covid related. As noted above, sometimes people have serious events in their lives like a medical emergency that might validly explain their failure to file their returns on time. In such cases, the agents have the discretion to waive all penalties and simply collect the back taxes owed. Typically, however, a deal to resolve the situation will involve your submitting the required documents and paying what you owe as well as the civil penalties for late payment of taxes + interest back to the original filing dates of the returns at issue.
Of course, you may also find yourself in a situation where you are simply unable to pay the amount you owe in back taxes. Our skilled Tax Attorneys and CPAs at the Tax Law Offices of David W. Klasing understand that life sometimes throws you curveballs, and we can work to explain your situation to the IRS agents handling your case. Most of the time, we will be able to get you on a reasonable payment plan so that you do not have to overly impoverish yourself by paying gigantic federal or state back tax bills all at once.
It is also important to remember that, while civil penalties are most common for failure to file issues, there is a possibility that you can be charged with one or more misdemeanor or felony (Spies Evasion) counts of the crime of failure to file taxes, which can lead to jail time if you are convicted. This crime can only be charged if your failure to file is found to be willful, meaning not due to a mistake or an oversight. Usually, it is only charged in cases where the willful conduct was extremely blatant or where you refuse to cooperate with the federal or state agents in assessing then collecting your back taxes. Furthermore, the longer you wait after missing the deadline to deal with this issue, the greater the chance becomes of the IRS or state taxing authority referring the matter for criminal tax prosecution. If you engage our skilled Tax Attorneys and CPAs early in the process, to date, we have a perfect track record of being able to avoid this.
If you have already been charged or under investigation for this crime or we are unable to talk the IRS or state taxing authority out of a criminal tax referral, our battle-tested tax lawyers at the Tax Law Offices of David W. Klasing are ready and able to defend you against these federal or state charges if ultimately investigated or filed. Since the IRS has a very high (90%+) conviction rate in cases they refer for a criminal investigation, we can try to work out a deal for the charges to be dismissed or downgraded in exchange for you dutifully fulfilling your filing obligations and making a faithful effort to begin to pay your back tax bill. If a deal is not possible, we will leave no stone unturned to craft the best defense possible to earn a declination, get a not guilty verdict at trial, or provide a cooperation based defense in order to achieve damage control if the government is intent upon prosecuting you to the fullest extent of the law.
Rely on a Tax Attorney for Non-Filed Tax Issues
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.
