Filing taxes is a responsibility that individuals must fulfill each year. However, life can sometimes get in the way, and you may find yourself in a situation where you haven’t filed your taxes for several years.
This can be overwhelming and stressful, but promptly addressing the issue is important to avoid further complications. This comprehensive guide will help provide information about what you can do if you haven’t filed your taxes.
What are the consequences of not filing taxes?
Before diving into resolving your unfiled taxes, it’s crucial to understand the potential consequences of neglecting this responsibility. Failure to file taxes can lead to various issues, such as penalties and interest; the Internal Revenue Service (IRS) imposes penalties and interest on unpaid taxes, and unfiled tax returns accumulating over time and resulting in significant financial burdens. Even if you cannot pay taxes, it is always best to file on time to avoid compounding penalties.
Furthermore, if you are entitled to a tax refund, not filing your taxes means you won’t receive the money owed. Refunds can be used to cover expenses, pay off debts or save for the future. If you wait too long, the right to receive a refund can be lost. In severe cases of non-compliance, the IRS may take legal action, like filing a substitute for return to assess tax based on information in its database.
How to address unfiled taxes
To effectively address your unfiled taxes, you’ll need to gather all the relevant information and documentation. Start by collecting all the income statements you received during the years in question, including W-2 forms from employers, 1099 forms for self-employment income, and any other relevant financial statements. Wage and income transcripts from the IRS can be helpful to help ensure proper tax reporting.
Next, you should compile records of deductible expenses, such as medical bills, business expenses, charitable contributions and mortgage interest payments. You’ll also need to gather your bank statements and financial records to help provide a comprehensive overview of your financial transactions. Lastly, and most importantly, locate any previously filed tax returns, as they can serve as a valuable reference for your current situation.
Failing to file taxes for multiple years can be daunting, but addressing it promptly and taking appropriate action is essential. By following the steps outlined in this guide and seeking legal guidance, you can successfully handle your unfiled taxes to avoid the potential consequences.