1-800-548-4639If you’ve missed filing three years of taxes, it’s not too late to fix it. While you may face some increasing penalties, you still have options. Filing now can avoid worse consequences down the road. It helps you get back on track and avoid further penalties and IRS collection actions.
Interest and Penalties Quietly Add Up after Not Filing Taxes for 3 Years
The Internal Revenue Service (IRS) imposes failure-to-file and failure-to-pay penalties beginning on the missed due date. The second penalty continues to add up over time, with a 0.5% penalty on the taxes owed for each month or partial month you didn’t pay. The sooner you pay, the less your penalty will be.
Besides penalties, you also face interest on your unpaid taxes. The IRSÂ sets quarterly interest rates, which may change over time. By filing and paying your taxes now, you can stop interest from accruing.
IRS Actions Become More Serious
If you haven’t filed taxes in three years, you have likely received several notices asking you to file. The IRS may have also created a substitute return for at least one of the missing years. That action means they have estimated what they think you owe based on your available financial information. It doesn’t account for benefits like credits, which makes it less favorable to you.
Initially, you only receive notices, but after three years, the IRS may have created a substitute return for at least one of the tax years. By filing now, you may be able to avoid forced action.
If you receive the proposed assessment and don’t respond, the IRS will send notices that they intend to levy, or take, your assets if you don’t pay. After the final legal notice, forced collection actions, such as wage garnishments or bank levies, begin. Essentially, the IRS starts to seize assets since they haven’t been able to collect money.
Missing out on Money That Could Help
You must file claims within three years of the return due date to claim refunds and tax credits because the IRS statute of limitations is three years. If you’ve gone three years without filing taxes, you have unfortunately missed out on a year of refunds and credits. However, you can still get the refunds and credits for the other two years by filing now.
Credits help you reduce the amount you owe, and refunds give you money back that you originally paid, whether as part of withholdings or tax estimates. Both make a difference in your financial situation, especially as you face penalty and interest expenses.
Filing Your Past-Due Returns
Not filing taxes for three years may seem like a lot of lost time to catch up on, but you can do it. The process begins with a few small steps, including tracking down past documents or requesting copies from your employer. If you’re worried about the financial consequences, you may be able to use payment options, including an installment agreement or an Offer in Compromise. You may even qualify for noncollectible status.
Get Back on Track With BC Tax
You’re not alone in facing your tax obligations. When you partner with us, we assist you with unfiled taxes and make sense of any penalties or obligations. We may even be able to help reduce your tax burden and other consequences you may face if you haven’t done taxes in three years. Reach out to our team for support.
Authored by the BC Tax Insights Team, this article reflects the collective expertise and experience of our seasoned tax professionals. The Insights Team at BC Tax comprises specialists with a deep understanding of various tax scenarios and solutions. With a focus on providing informative, accurate, and practical insights, our goal is to guide readers through the complexities of taxation and financial planning. Every piece is crafted with the intent to help individuals and businesses navigate the ever-evolving world of taxes, ensuring clarity and confidence in decision-making.
