For the next few weeks, we’re running a “Slice of Life” series where we address real-life problems our clients bring us after they’ve filed their taxes (or not). You can read Part 1 – Slice of Life: I’ve Been Scammed and Part 2 – Slice of Life: I Hate Filing Quarterly of the series.
SLICE OF LIFE #3: A client calls us (usually a few weeks after Tax Day) in a huge panic. “I haven’t filed my taxes in years. I haven’t heard from the IRS, but I’m so scared that I’m going to hear from them that I’m losing sleep over it. What should I do?”
Unfortunately, this problem is more common than you might think.
Lots of people don’t file when they should. Maybe they just had a bad year and thought they’d catch up when times got better, and then it happened again….and again. The next thing they know, they have years of delinquent taxes.
If you have this problem, you have a ticking time bomb on your hands. The IRS eventually will catch up with you, and you will have to deal with a huge backlog of penalties and interest. Also, if you’ve flown under the radar long enough that your statutes are about to run out, you can expect the IRS to come after you in a very aggressive way. Failing to file is technically a misdemeanor. You can be fined up to $25,000 for each delinquent year, and possibly sent to prison for up to a year.
The good news is, the IRS is really more interested in having you pay than prosecuting you. If you make a good-faith effort to deal with your tax problem, you will probably not go to jail. The IRS can’t assess penalties higher than 25% of your tax payment for any given year. But interest continues to accrue on top of the penalties, and if you owe several years of back taxes, this amount can pile up very quickly.
So what should you do?
First of all, call us. You may not have realized this, but if you don’t file a tax return, the IRS files one for you: the Substitute for Return (SFR). This return calculates your taxes at the highest possible amount (single or married filing separately rates, with no dependents or deductions). We can get this return amended so you can take advantage of whatever deductions you would have had in that year.
We can help you untangle your records from past years to determine what you made, what you spent and what you owe. We can also help persuade the IRS to reduce your penalties if you’ve had reasonable cause not to file (illness, death in the family, alcoholism, military service). Then we can help you set up a payment plan with them, or in some cases arrange an offer in compromise or even move your debt to Currently Not Collectible status.
Remember, you don’t have to handle this alone.
You know you’re going to have to pay your taxes sometime. If you bite the bullet and deal with it now, you’ll feel much better. We promise.
If you owe back taxes and you need help, give us a call at 844-841-9857, or schedule a free consultation here.