What You Should Know About Unfiled Tax Returns?

Unfiled or incomplete returns are a widespread issue for all types of taxpayers. Late filing penalties will apply if you do not file your return on time. For each full calendar month your return is late, you will be penalized 5% of the balance owed PLUS 1% of the balance owning (to a maximum of 12 months). If you have been assessed late filing penalties in the previous three tax years, the penalty doubles to 10% of the sum owed PLUS 2% of the balance owing for each full calendar month the return is late (up to a maximum of 20 months).In addition to the penalties, if you have a balance owing, you will have to pay compound interest on the sum for as long as it has not been paid in full. Interest and penalties can quickly accumulate to exceed the amount of tax owed, causing people to lose property or file for bankruptcy. You can see how critical it is to seek assistance as soon as possible if you are behind on your filings. The tax returns that are unfiled can result in heavy penalties which can drain your bank account so it’s better to pay the taxes before the last date to avoid such penalties.

The main advantage of filing on time is that you will be able to claim all of the credits and deductions that are due to you. If the IRS files a substitute return on your behalf, it is unlikely to award you the credits you are due. Indeed, the IRS will almost definitely file in a way that favors the government rather than giving you with the greatest possible outcome. Here’s how the process works once the IRS takes over filing your return:

  • You will get a Notice of Deficiency from the IRS suggesting a tax assessment.
  • You will be given a 90-day window to file your overdue return.
  • You can also use your 90-day timeframe to submit a tax court petition
  • Failure to take either option authorizes the IRS to proceed with its proposed assessment.