QUESTION:
I haven’t filed my tax returns in several years. I prepared the one year and was going to owe more than I could pay. I’ve been afraid to file ever since. What will happen if I file them all now?
ANSWER:
You should file those tax returns because until the returns are filed, the IRS may collect from you until the end of time. You will also help reduce the amount of penalties that will be assessed against you for not filing. Practically speaking, when you file a late return, the IRS will assess interest and civil penalties against you. The civil penalties that can reach up to 25% of your tax due and also a late-filing penalty that can range from ½% to 1% per month. Not to mention the interest that is accruing all the while that is generally around 8% and is compounded daily. Before the IRS can begin to negotiate with you regarding your tax liability whether it be for a monthly installment agreement or to totally reduce your tax liability with an offer in compromise you will be required to file the last seven years of tax returns. If you haven’t filed your tax returns lately because you don’t know how you will be able to pay the tax, please contact my office to see how we can help you settle your tax liability or set up a payment plan with the IRS.