Many people get worried when they haven’t filed taxes in years and their anxiety may be justified. Tax debt problems have even pushed some people to do the unthinkable. After all, for those that meet certain thresholds, filing and paying any tax due is a requirement. Failing to do so could result in penalties or, in some cases, criminal prosecution. There are several other reasons why you should get tax help if you have several years of unfiled returns.
LOST REFUND
If you haven’t filed taxes in years, one reason that you will want to get current is the potential loss of your refund. If you are owed a refund you will not incur a penalty. However, you have until the later of 3 years after the due date of the return or 2 years after any tax has been paid to claim a refund. On the flip side, if you haven’t filed taxes in years, and you owe the IRS, they can come after you in future years to collect what is due. The statute of limitations for the IRS to assess and collect tax due does not begin until a tax return has been filed.
PROOF OF INCOME
One other reason for becoming compliant with your tax filing is for income verification. If you plan on obtaining a mortgage or receiving financial aid from school it is very likely that proof of income will be requested.
SOCIAL SECURITY BENEFITS
If you are a business owner, your earnings will not be reported to Social Security. This could result in you receiving a smaller social security benefit down the road.
SUBSTITUTE RETURN
It’s also important to note that if you do not file your back taxes there is a chance that a tax return will be filed for you. If the IRS files a return for you, it will likely not include all the credits and deductions that are available to you.
It’s in your best interest to get compliant. Don’t wait. File your back taxes today!