What Happens if You Don’t File Your Taxes for Five Years?

4 Mins read

I have not done my taxes in five years. How do I start?

Almost everyone goes through it at some point. Something happens in your life that makes you lose control of things, and one of those things is filing your income tax returns. Sometimes it’s because someone in their family has died, leaving them sad and depressed. Because of this, they can’t deal with doing their tax returns when they’re due. Sometimes it’s because they’re having money problems and are afraid to file their tax returns because they might not be able to pay any unpaid taxes. Some may have the option of applying for the IRS forgiveness program. Ideal Tax has helped individuals and businesses settle their tax debt for a fraction of the price. Visit them here:

People don’t file their taxes for many different reasons, but they all have in common that they don’t want to deal with taxes for more than one year at a time. Once you stop filing your tax return for one year, it always snowballs because you think, “I’ll do this year’s return when I finish last year’s return.” You end up with more unfiled tax returns, and before you know it, it’s been several years since you last filed. You may be putting IRS notices about unfiled tax returns in a pile of unread mail because you don’t have the time or energy to deal with them right now.

Often, this is how taxpayers live for years. In some cases, the IRS will make what they call a “substitute for return” (SFR), but in most cases, they keep sending notices that they haven’t gotten a return, which taxpayers continue to ignore.

Overview of essential IRS filing rules

You only have to file a tax return if you meet specific requirements in a given tax year. For example, most people have to file taxes because they make more than the standard deduction, which is also called the income filing threshold. For the tax year of 2022, these were the amounts:

$12,950 for taxpayers who are single or married but file separate returns.

$19,400 for people who file as head of household.

$25,900 for married couples who file taxes together or qualifying widows or widowers.

Even if you made less than the filing threshold amount, you might still need to file a return.

Don’t pay your taxes?

If you don’t file your tax returns on time, you may have to pay extra fees and interest from when your taxes are due. Not filing or paying taxes could also be a crime. The IRS says there are several ways to break the law regarding avoiding paying taxes.

Under Section 7201 of the Internal Revenue Code, anyone who tries to avoid paying taxes on purpose can get up to 5 years in prison and a $250,000 fine.

Most of the time, the government has a certain amount of time to file criminal charges against you if you don’t pay your taxes. If the IRS wants to charge someone with tax evasion or a related crime, it must do so within six years, which usually starts when the tax return was due but wasn’t filed.

People may not mean to fall behind on their taxes. There might have been a death in the family, or you might have been very sick. You might be tempted to keep putting it off, no matter why you haven’t filed in a few years. But if you don’t file your taxes for ten years or more, you could face steep fines and even time in prison.

If You Owe Taxes to the IRS

As soon as your return is even one day late, you could owe both the failure-to-file (FTF) and failure-to-pay (FTP) penalties. The FTP penalty is 0.5% of the amount of taxes owed, and the FTF penalty is 5% of the amount of taxes owed per month. But there are ways to avoid or lessen these consequences.

You can put off having to pay the FTF penalty by asking for a six-month filing extension. With the extension, you will have until about October 15 to send your tax return. After that, if you still haven’t filed, the IRS will add the FTF penalty to your tax debt.

Options for Resolving Back Taxes

Falling behind on your taxes can feel like you’re stuck in quicksand. The more you struggle, the deeper you seem to sink. But there is a way out. Here are your options for resolving back taxes.

Get Help 

The first step is to contact the IRS and explain your situation. The IRS may be willing to work with you to establish a payment plan. This will allow you to make smaller, manageable payments over time rather than one lump sum.

Offer in Compromise

If you’re unable to pay your taxes in full, you may be able to negotiate what’s known as an Offer in Compromise. This is an agreement between you and the IRS that settles your tax debt for less than what you owe. To qualify for an Offer in Compromise, you must prove that paying your full tax liability would create a financial hardship.

Non-Collectible Status

Another option is to request what’s called Currently Non-Collectible Status. This status means that the IRS has temporarily halted collection efforts due to financial hardship. To qualify, you must provide documentation of your income and expenses. Once your financial situation improves, you’ll be expected to resume making payments on your tax debt.

Let’s Summarize

If you haven’t filed a tax return for a few years, you should look into the situation and see what you can do. This could save you a lot of money in fees and interest if you do it. In rare cases, it could keep people from going to jail. On the bright side, getting your money back may make some money out of the process. In 2019, the IRS said that $1.4 billion in refunds had not been claimed. So don’t wait too long to get the money the IRS owes you.

Ideal Tax has a great team of experienced tax professionals who can help you get back in charge of your taxes. Also, they are one of the many qualified tax relief companies that can help you get the best possible result if you have a lot of tax debt. If you have a lot of tax debt, the tax experts at Ideal Tax might be able to help you get out of it. 

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