Summary: There are many reasons why returns often go unfiled, but many other reasons why taxpayers shouldn’t delay filing. Don’t let the fear of the unknown result in unfiled tax returns.

Having tax returns that remain past due and unfiled can stress out even the most steadfast of spirits. This is definitely a slippery slope. Confronting the issue is the only way to stop the cycle. Only bad things can happen if a taxpayer continues not filing returns. Getting the returns filed begins the trip uphill.

Why Returns Go Unfiled

The most common reason we find that a taxpayer does not file their tax return is fear of the unknown. Perhaps they filed one year and owed a lot of money. When tax time came the next year, they were afraid they were going to owe again, so they procrastinated filing the return.

Another common reason is just being too busy to get together the paperwork. April 15th sneaks up every year and it is all too easy to file for an extension to file until October. Fall rolls around and we are still just as busy. Then, it has been a year and we are back to where we started.

More often than not, individuals with unfiled tax returns are either business owners or contractors with 1099 income. Usually, estimated tax payments have not been made and taxes are owed for each year.

Reasons to File Returns

There are many reasons for a taxpayer not to delay filing. These issues include, but are not limited to:

  • Refund claims must be made within three years of the return due date. The same rule applies to certain tax credits such as the Earned Income Credit. This typically means the fourth calendar on April 15th after the tax year in question.
  • Past-due tax returns fail to report self-employed income to the Social Security Administration. This means credit toward Social Security retirement or disability will not be recorded.
  • Failure to file could result in a Substitute Return being filed on the taxpayer’s behalf. The liability will be much higher than if the taxpayer files the returns.
  • A taxpayer is not eligible for an Installment Agreement or Offer in Compromise until all due returns are filed.
  • To be eligible to file bankruptcy, a debtor is required to have filed all returns due in the last four years.

These problems are very serious and need to be dealt with quickly before any more damage is done. A taxpayer must remember that dealing with the problem now is always better than dealing with it tomorrow.

What to Do

Consult with a qualified tax preparer and get your returns filed. If you have substantial liability, consider tax resolution options.

Disclaimer: This information is intended for informational or educational purposes only. It is not intended to supplement or replace legal representation and should not be construed as such. Each situation is unique and you should consult an attorney for advice on your particular problem. This information below is subject to legislative or procedural change by the IRS at any time and without warning.

Return to Taxes

Return to Wiki