Content Overview
- Summary
- Alternatives For Handling Tax Debt
- Alternatives To Consider If You Cannot Reach An Agreement With The IRS
- What To Do If You Have Not Filed A Tax Return That You Were Supposed To File
- What To Do If You Receive A Notice From The IRS That You Owe Money
- How To Ask For A Waiver Of IRS Penalties
- How To Speak With The IRS Effectively
What To Do When You Owe Money For Back Taxes To The IRS (Whether The IRS Knows It Or Not)
What To Do If You Have Not Filed A Tax Return That You Were Supposed To File
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Many people with illnesses stop filing returns because they expect to die before having to face the consequence. Some people just don't file period. Whatever the reason, you should consider filing any past due returns immediately. A clean "tax bill of health" will remove stress from your life and is a cornerstone of a sturdy financial house/ Among other reasons, owing taxes negatively affects your credit rating. (For a discussion of the importance of credit to people with a health condition, see The Importance Of Credit.)
By filing past due returns now, even if you don't have the money to pay the taxes you think your returns will show you owe, you'll also stop the accumulation of late filing fees (even if you don't stop interest accumulating.) Late filing fees can be up to 25% of the tax due. If you don't file, there is also the possibility that criminal charges will be filed against you.
At the least, make sure your returns are filed for a minimum of the past six years. We mention six years because the government cannot criminally charge you for failing to file beyond that time. The IRS also frequently purges its computer files after six years. However, be advised that there is no limit to the time in which the IRS can audit you, collect taxes, or assess civil penalties for not filing.
Once you do file a return, the audit time limit decreases to only three years, (unless you've underreported your gross income by at lest 25%).
If there is a tax refund due you for any of the past years, you may lose it. If you don't file a return within three years of its due date, your right to a refund will be forfeited. Note, however, that the limitation period on refund claims is suspended if the reason for the delay in filing is that you have an illness that is expected to result in death or last for at least the next 12 months.
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