All About Past Due Tax Returns

Taxpayers neglect to file returns for countless reasons. If you’re one of them, here’s what you need to know.

Believe it or not, there are individuals who don’t file tax returns even though they’re owed a refund. (They do have three years to claim it.) It’s more likely the opposite, though: Some people don’t send in their 1040s because they’ve determined that they owe money and they simply can’t pay. Or there was an illness or other misfortune in the family. Or they lost the forms that came in the mail and didn’t get them replaced in time to file on April 15.

That mid-April deadline, though, is firm. The IRS expects everyone to at least fill out the forms and make an effort to pay, whether you’re a day or a month or a year late. Here are some examples of what can happen if you don’t:

  • You’ll of course be assessed interest charges and late payment penalties.
  • If you’re self-employed, the income you would have claimed will not be relayed to the Social Security Administration, and you won’t get some of the credits that compose your benefits.
  • Refinancing your home or trying to get a business loan? The financial institutions that you’re working with will want to see past returns, and your request will probably be denied or at least delayed.

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Can’t Pay? There are Options

We hope that you’ll contact us if you have outstanding tax returns. There are actions you can take. We can help you sort through them and determine the best plan for your specific situation.

For example, if you fill out an Online Payment Agreement application, you may get an extra 60-120 days to fulfill your obligation. The IRS may also allow you to set up an installment agreement. There’s also something called an offer in compromise.

The IRS may file a substitute return for you if you fail to file voluntarily. There are still ways to deal with this, but keep in mind that not doing anything may eventually result in a levy on your financial accounts or your wages or even a federal tax lien. Delinquent tax filings sometimes end in criminal prosecution.

There are pros and cons to all of these arrangements, and you won’t automatically be able to qualify for them. We understand your options here, and we can help steer you in the right direction.

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The Notices

There are numerous official notices you may receive if you missed a tax deadline by not filing. The IRS may issue a CP59 Notice, in which case you need to either file immediately or tell them why you didn’t. The notice will contain a response form; this gives you a chance to explain one of three things:

  • You did file,
  • You aren’t required to file, or,
  • You’re late in submitting your return because…

Planning is Essential

The inability to meet your income tax obligations at filing time often indicates a problem with your financial planning. Do you do any tax planning throughout the year? If estimated taxes are due quarterly, do you pay them? Are you having trouble collecting payments due, or are you experiencing other fiscal difficulties?

Tax planning should be a year-round activity. We don’t want to see you in a bind every April. And we certainly don’t want your business or your personal lives to be in financial crisis because your taxes are in arrears and you don’t know what to do. So contact us. We’ve been through similar situations with other clients. Together, we can build a plan to catch you up and keep this from happening in the future.

About Brenda J. McGivern, CPA

Brenda McGivern started her own certified public accounting and management consulting firm in October 2001. The full service CPA firm provides tax and accounting solutions to meet the needs of today's small business and individual. Brenda McGivern has become a trusted advisor and valuable resource her clients rely on for timely, accurate assistance when they need it. Before starting the firm, she worked as an accountant for three years at a local firm and prior to that five years at a large international CPA firm in Boston. She has performed the following tax services: federal, state and local tax planning, international tax planning, estate and succession planning, mergers and acquisitions, capital retention and IRS representation. She has also coordinated assurance engagements, such as financial statement audits, reviews and compilations from the planning phase through the reporting phase. She has prepared and reviewed regulatory filings for numerous regulatory agencies including the Security and Exchange Commission. Prior to these positions she was selected from over 2,000 candidates into an eight-person intensive financial management program at an international technology company. The program consisted of graduate level classroom study and two six-month rotational assignments in financial operations. She graduated cum laude from the University of Massachusetts at Amherst and holds a Bachelors Degree in Business Administration with a concentration in accounting. McGivern also holds a license in Massachusetts as a Certified Public Accountant and is a member of the American Society of Certified Public Accountants and the Massachusetts Society of Certified Public Accountants. She resides in Stoughton, Massachusetts with her husband Brian, and their sons Sean, Ryan and Conor and their dog, Davis.
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