Unfiled Tax Returns
Having unfiled tax returns can be really scary and overwhelming, whether it’s just one year or a decade’s worth that needs to be done. There are a lot of reasons why someone might miss filing deadlines: people get overwhelmed, there are family or health crises, or maybe a business partner said they would handle it and didn’t. More of our neighbors in Bakersfield than you think have unfiled tax returns, so there is absolutely no reason to be ashamed of this very common problem. You may feel alone as a non-filer, but with over 10% of citizens in the country behind on their taxes, there are millions of people dealing with the same problem as you. What matters is that you are taking the steps to move forward.
What Happens If You Don’t File?
When you don’t file your taxes, you will start getting notices from the Internal Revenue Service or the California Franchise Tax Board, each more aggressively than the last reminding you of your missing tax return. Eventually, the government may take the step of preparing what is called a Substitute For Return for you.
When the government prepares an SFR on your behalf, they take all of your income and none of your deductions, so the balance they send to you at the end is often substantially- and shockingly- high. This is especially true for contractors who work on a 1099; we have a number of clients who work in the Kern oil patch or in as truck drivers in the oil or ag industry who are often absolutely shocked by the balance due notices they receive from the government for these Substitute For Returns.
If the government files for you, it is still important that you go back and refile (or, rather, file for the first time) the tax retruns in question. After all, it’s important that you are able to claim your deductions and exemptions that you are legally entitled to. Even the IRS agrees and encourages taxpayers to enter into what is called the Audit Reconsideration Process: “If the IRS files a substitute return, it is still in your best interest to file your own tax return to take advantage of any exemptions, credits and deductions you are entitled to receive. The IRS will generally adjust your account to reflect the correct figures.”
If you don’t file and don’t fight the Substitute For Returns, the government will enter you into the collection process. This means that your assets can be levied or seized to pay the debts incurred on what is likely an incorrect calculation that is based on only partial information. If you do not want your check taken or your bank account emptied out, it’s important that you face this problem head on.
How It Can Be Fixed
Put simply: you have got to file. This can sometimes feel like an Herculean task, especially when you have ten or more years of unfiled. When clients come into our office in southwest Bakersfield, most often express that they have no idea where to begin. This is why an experienced professional in this area is simply invaluable: tax professionals like our family at Tax Crisis Institute can help guide you through the process of preparing your unfiled returns. No situation is hopeless and, the truth is, with the right skills and organization, these things are often far easier to get done than you would think.
How Many Years Do I Have to File?
The Internal Revenue Service Statute of Limitations is 10 years, but most people, most often can simply focus their attention on preparing the last six years of returns. If you have unfiled returns with the California State Franchise Tax Board, their collection statute is 20 years, but sometimes longer– so, you may find yourself needing to file tax returns with them that go back well into the 90s.
The above probably sounds very scary (and probably a little overwhelming). The fact is that every tax situation is totally unique from the last, so it is more important than ever that a taxpayer with substantially delinquent returns works with a professional to right the course of this situation. At Tax Crisis Institute, we can guide you so you don’t file more than you legally need to (something that could very well trigger substantial, serious additional tax debts that you didn’t need to bring forward). We deeply value the unique circumstances of each and every client’s personal situation and take extreme pride in tailor making responses that meet the highest legal standards and aid our clients in moving forward with their lives in the most effective, empowered way possible.
But. . . I Don’t Have Any Paperwork, How Can I File?
Don’t worry: most people don’t and that’s ok. The reality is that very few people keep records going back ten or more years, so all government agencies have different procedures in place for working within the bounds of this extremely common situation. Our office is happy to help guide you in reconstructing your income and expenses in adherence to the highest legal standards.
For your income, this reconstruction is often actually pretty easy. The Internal Revenue Service keeps detailed records of all income information that is reported to them- after all, that’s exactly what they use to prepare a Substitute For Return for you when you don’t file. So, more often than not, it’s extremely easy for us to get you copies of things like W2s, 1099s, mortgage statements, and even unemployment statements. If you own a business, it becomes a bit more complicated to put together past income, but it’s far from impossible. There are methods we can use to help you here. For example, did you know that banks keep copies of your account statements for up to seven years? Some local banks here in Bakersfield even keep their records longer than that! Old bank statements are often a great way to reconstruct business income (and expenses) when filing back taxes.
How Long Does It Take?
The actual preparation of unfiled tax returns isn’t that long of a process. We want to take our time and prepare the absolute best return we can, but even then, the actual tax preparation side of things is a relatively quick process, mostly dependent upon how long it takes for a taxpayer to furnish their income and expense information.
What does take a sometimes lengthy period of time is waiting for the government to process your tax returns once they are mailed out. While turn around time varies pretty significantly based on government bureaucracy, on average, you can expect to wait six months for the California State Franchise Tax Board to overturn a Substitute for Return assessment and you can expect the same to take up to eight months with the Internal Revenue Service. That’s a long time, so it’s important that while that process is taking place, you have a tax professional working on your behalf to make sure you are not facing forced collection action, like levies or garnishments.
How We Can Help
It is easy to feel hopeless when you try to fix things with the Internal Revenue Service or any state tax agency. When you find yourself in this situation, it is absolutely necessary to get proven tax professionals on your side. At Tax Crisis Institute, our goal is to keep you from paying interest, incorrect tax assessments, and any penalties that you just flat out don’t owe. There is usually an overwhelming reason in your life that you do not file. Come into our local office on California Avenue today and take the first step to putting your unfiled returns behind you. We have been here in Bakersfield for over 30 years and are ready to put our experience to work for you.