How To Deal With a Past-Due Tax Return

“Better late than never” applies to filing income tax returns, too. Here’s what you should know.

Perhaps you weren’t able to file your income taxes in the previous year because you weren’t able to complete your 1040 before the deadline. You might have thought you owed money you didn’t have. You might have simply forgotten. People may file their taxes late for different reasons, and the IRS has systems in place to handle this.

It’s absolutely crucial that you file every year, for a variety of very good reasons. Failure to file means that you might:

  • Accrue interest and penalties.
  • Miss out on a refund (you can claim a refund for up to three years after the return due date).
  • Jeopardize your Social Security benefits. If you’re self-employed and don’t file, you will not be credited for income that year.
  • Have an issue if you can’t supply a tax return to a potential lender.

File It As Soon as Possible 

As soon as you realize you have a past-due tax return, you should prepare and file it. You can find forms and instructions from prior years here.

If you can’t pay what you owe when you file, you can ask for an additional 60-120 days to fulfill your financial obligation. If that’s not enough time and/or you’re going to need to pay in installments, you can apply for an IRS Payment Plan. As it turns out, they would rather set you up with a payment plan than have you not pay at all!

What Happens If You Don’t File?

You might be able to file a substitute return with the IRS. If this happens, you may not get all of the deductions and credits that you should. Even if the IRS already prepared a substitute return, you should still file a tax return that includes everything. In most cases, the agency adjusts the return they created to reflect credits, deductions, and exemptions after they learn about them.

The IRS will notify you if the agency files a substitute return. You’ll receive a Notice of Deficiency (CP3219N), otherwise known as a 90-day letter, which gives you 90 days to either file your return or submit a petition to Tax Court.

In the absence of either of those actions, failure to pay it will result in your account going into the collection process. This can include the filing of a federal tax lien or a levy on your bank account or wages. If you continue to ignore the bill, you may be subject to additional penalties and/or criminal prosecution.

Potential Problems

You may find as you’re preparing your return that you need additional information. For example, you might need information from a tax return filed in a prior year. If that happens, you can use the IRS’ Get Transcript service. Or maybe you’re missing wage and other income information from the year of the return you’re filing. You can always contact your employer or other source of income. Or you can complete an IRS Form 4506-T, Request for Transcript of Tax Return and check Box 8. The agency can provide data from Form W-2, Form 1099 and 1098 series, and Form 5498 series.

Where to Send Your Past-Due Return

If you realized on your own that you didn’t file a return and wish to file it, you should send it the same way and to the same address that was originally indicated. If you received a notice, though, submit it to the address provided on it. The IRS says it takes roughly six weeks to process a completed past-due return.

Any correspondence from the IRS can create a lot of anxiety, as can realizing you missed a tax deadline—perhaps by a lot. We encourage you to contact us if you’re at all concerned about a return you didn’t file. We can help you understand what your options are and how to proceed. We can also help with tax planning throughout the year, so you don’t have to deal with a past-due return again.

Were you owed a refund on your income taxes but didn’t file a return for that year? You have up to three years to file and claim it. There are many reasons why you should always file an income tax return, no matter what. Interest and penalties are one consequence.

Need to file an income tax return from a previous year? You can find the forms you need here. Don’t have the time, or the will to take on this task? We can help! The team at Soukkala Consulting is here to help with all of your tax needs. We can even take over the chore completely, so you don’t have to worry about it.

Visit our website or get in touch with us today to get started!

 

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