Frequently Asked Questions and Answers to Unfiled Tax Returns (FAQs)

Unfiled or Delinquent Tax Return FAQsQ: How Do I Know If I Need to File A Tax Return?

A: Whether you needed to file for a certain year depends on your age, filing status, and income for that particular year. Each year the IRS puts out Publication 17, which will provide details as to whether a taxpayer needs to file. At any rate, not filing your taxes will create many problems including penalties, and potential tax liens and tax levies.

Q: What Are Consequences of Not Filing A Tax Return?

A: There are many possible consequences if you do not file a tax return. You could face a failure to file penalty of 5% per month (no more than 25%) on any unpaid balance. If you fail to file a tax return, you cannot get a refund, carry losses over to the next year, start the time clock on when the IRS can audit, and you cannot qualify to discharge taxes in bankruptcy to name a few drawbacks. Most important, although rare, you could face a fine of up to $25,000 per unfiled tax return and go to jail up to a year. Eventually the IRS will file a tax return for you called a “SFR” or Substitute tax return in addition to possibly handing you penalties and charging you interest. The problem with the SFR is the IRS will short change you on deductions and credits which may cause you to owe taxes when you were due a refund or cause you to owe more taxes than you originally thought.

Q: What If I Lost My W-2 Documents and 1099s for the Particular Year I Need To File?

A: If you lost your W-2(s) or 1099(s) for a particular year you need to file, call the business that you would have received them from. Typically businesses (your employer, banks, stock brokerage etc) will carry these records for years. If you are having no luck, you can call the IRS actually at 1-800-829-1040 and ask for a printout of the data you need for the year(s) you did not file. Although the IRS cannot provide you actual W-2s or 1099s, you will at least have enough information for your baseline tax amount to report on your taxes.

Q: What Are Different Ways The IRS Contacts Individuals Who Do Not File?

A: The IRS typically starts off by sending you a letter or notice in the mail at the last address they have on file for you. Lettters or “CPs” may let you know that not only did you not file, but that you have a balance due, a hold on a refund, and more. If you do not respond to these letters, then they may follow up with a phone call or a letter telling you that you have 30 days to get your returns filed. If you fail to take corrective action after this, collection efforts may start. In extreme cases, you will get a telephone call or visit from an agent. Many times, if you still do not get your returns filed, the IRS will fill complete one for you.

Q: Do I Still Need To File Even If I Do Not Owe the IRS?

A: Technically, if you do not owe the IRS you do not need to file a tax return and you will not be hit with the 5% per month penalty as that only applies to those who taxes. However, there are many other disadvantages(discussed above) if you do not file.

Q: Are Tax Penalties Deductible on Tax Return?

A: No, tax penalties are never deductible on a tax return but interest may be if the interest is related to taxes not paid by a business.

Q: How Should I Send Late Tax Returns to the IRS?

A: The best way to send tax returns to the IRS is in person by going to your local office because you can get a receipt directly from the IRS. You can find a list of local offices by state by going to the IRS.gov website. If you cannot visit a local office, then it is best to send a tax return via certified mail so that you get a return receipt that your return(s) was actually delivered.

Q: Can You E-File A Late Tax Return?

A: Depends. You can typically efile a late tax return up until the IRS’s extension deadline of October 15th (October 17th for 2011) if the tax return is for that year. After October 15th (October 17th in 2011), you will need to send it via mail.

Q: Is It Ever Too Late To File? How Long Can It Be and Yet Still Receive A Refund?

A: It is never too late to file. You will have up to 3 years from the due date of a tax return to request a refund though. Once three years has gone by, you cannot request your refund.

Q: If I Am Filing A Past Due IRS Tax Return, Can I Use This Year Tax Form (1040)?

A: No, you will need to use the tax form for the year you are filing. Go to IRS.gov if it is federal tax filing or your state if an state income tax filing. If you cannot find the form you need online, call instead.