The most common reason for not filing tax returns on time is when a tax bill is owed.  Unfortunately by not filing, the unpaid balance of your taxes will be charged with the failure to file penalty which is 5% a month. If you do not owe the IRS money and you did not file, the IRS will not impose penalties as long as they agree that no taxes are owed. If you are owed a refund and do not file, the IRS will not send you the refund until your taxes are filed. The IRS does not look favorably on individuals who fail to file their income tax return by the deadline, however they will be more willing to work with individuals who take the necessary steps to fix the problem versus those who pretend it doesn’t exist.  If you haven’t filed your return on time, the following information can help you back on track and avoid additional fees and penalties.

• File your tax return as soon as possible-  There is no way around it, you must file your tax return even if you are filing it late.  After the deadline passes you no longer have the option to request an extension, therefore the sooner you file your return the better.
• Determine how long it will take to pay your tax bill-  Look at your current financial situation and figure out how much time is needed to pay your tax bill.  The ideal scenario would be that you have the resources available to pay your bill in full, therefore eliminating the additional fees and penalties that will accrue over time.  If you do not have the resources on hand to pay your tax bill you should determine how long it will take to repay the money owed.  This information will be needed in order to set up an installment agreement or other type of payment plan.
• Contact the IRS to arrange payment-  As long as your tax bill remains unpaid, you will continue to accrue penalties and fees that can significantly increase the amount of money owed.  By working with the IRS to establish a repayment plan, you can begin making payments to reduce your tax bill, thereby reducing the amount of fees and penalties that are applied to the liability.
• Consider a loan-  Depending on the amount of money owed and your ability to secure personal financing, you may want to consider borrowing money to pay off your tax bill.  Before doing so you should carefully review the terms of any new loans to ensure you are selecting the option that will save you money in the long term.

It is not uncommon to feel overwhelmed or intimidated when dealing with the IRS and unresolved tax issues.  If you have failed to file your tax return on time and do not feel up to dealing with the situation on your own, consider hiring a tax professional to help guide you through the process.  Delaying the inevitable will only result in additional stress on your part and a growing tax bill that will have to be addressed at some point in time in the future.  The sooner you face the situation and develop a plan to deal with any taxes owed, the sooner you will be able to resolve the problem and move on with your life.

Related posts:

1. When to File a Late Tax Return or Request a Tax Extension
2. 2010 Tax Filing Extension: Instructions & Forms to File IRS Extension
3. Filing a 2011 Tax Extension: 2012 Deadline Dates & How to File

The Details Matter

Ideally, you will take action to correct the problem as soon as you can. Don’t fool yourself into thinking that the IRS will somehow “forget” that you’ve not pay your income taxes. If anything, you can count on them addressing that issue in a timely manner. If you’ve chosen not to file (regardless of the reasons) for more than one reasons, the consequences may be much worse. Most of those who do not file do so because they cannot pay the tax bill that is due. Yet not filing is a mistake since you’ll owe more due to penalties and interest. The big penalty, the Failure to File Penalty, is up to 5% a month, up to five months on unpaid balances. This should highlight some big reasons why you need to take action. You may be wondering what kind of action to take. Keep reading because I will share some steps that may help you fix the problem.

Of course the starting point is filing. You must file a tax return even if you’re filing late and can’t pay what you owe. Once the deadline elapses you have no way of getting an extension. This means the faster you get that return sent off the better. The penalties for filing taxes late varies depending upon your situation. It is especially important for those individuals that owe taxes to file ASAP.

Evaluate Your Financial Situation for Repayment

Even before that return is in the mail, sit down and figure out what sort of timeframe you will need to get the resources necessary to start paying (or pay off) that tax bill. Certainly, we all want to be able to have the money on hand to pay it off now so we don’t have to pay interest, penalties, and other fees. Most of us can’t count on the ideal. Therefore, we have to think in terms of installment payments. The IRS does have some guidelines regarding payoff ranges. If you owe $10,000 or less, you usually get 36 months. If it is more than $10,000 but less than $25,000 you get around 60 months.

Other Payment Options

Obviously, if the tax bill is just left out there, you’ll start racking up penalties and fees, making the total amount much higher. If you can talk to the IRS about a repayment plan, then you can get busy reducing the bill. This can be accomplished with the help of an IRS representative or a tax professional.  Another option you might think about is to take out a loan. This one may be determined based on different factors as well as your viability as a borrower. If you can get personal financing you can use this loan to pay off the tax bill in full, completing your obligation to the IRS.

Get Started Now

It can be overwhelming to deal with the IRS about your unpaid taxes. There’s no doubt about it. On the other hand, if you avoid the issue, you could make it so much worse than if you had simply addressed it. It may have required you to contact a tax agent to help you sort through the problem and figure out the proper course. With a plan, will be able to get back on track – and get the IRS off your back!

If you need help filing unfiled taxes and paying back taxes, we can help! Request a free consultation and one of our tax representatives will contact you and let you know your options.

Related posts:

1. How to File for a 2009 Tax Filing Extension
2. What If I Didn’t File My Taxes or Request an Extension to File?
3. 2010 Tax Filing Extension: Instructions & Forms to File IRS Extension

1. Sen. John Kerry- Our favorite democrat from Massachusetts, slipping the presidential nomination in 2004, has also slipped something else. Boat “slip” that is, as Kerry just recently docked his $7 million boat in Rhode Island to avoid paying a $500,000 Massachusetts tax fee.
2. Tim Geithner- One would think that the Secretary of the Treasury would have a bit more of a handle on his own money. Claiming to have made a “simple mistake,” Geithner reportedly missed paying self-employment taxes from years 2001 to 2004, when he worked for the International Monetary Fund. How much exactly did Geithner “forget” about, around $34,000.
3. Nancy Killefer – As Obama’s nominee for Chief Performance Officer in 2009 and former Clinton administration treasury department employee, Killefer was ready to go for the newly- created CPO position. Well, until she dropped out of the running due to her discovered failure to pay unemployment taxes for household help in D.C, resulting in a $900 tax lien. The CPO position, originally created by Obama to help federal agencies reach established performance targets, would probably be better suited for someone who could manage and reach their own monetary targets, first.
4. Tom Daschle – Another one of Barack Obama’s nominees, this time for the position of Secretary of Health and Human Services, also withdrew from the ballot after an exposed failure to pay income taxes. Owing the IRS approximately $128,000, Daschle joined Geithner on apparently making what the White House claimed to be a “serious mistake” in failing to pay his back taxes.
5. Lael Brainard-  Finally, we have Mrs. Brainard, current Secretary of the Treasury for International Affairs and former deputy of the Clinton administration, who too has seen trouble with the IRS. Turns out Lael was late on paying property taxes from 2005 to 2008, accumulating penalties and interest over the time.

Fighting for an increase in taxes yet slacking on paying their own tax bills, these five individuals should probably work less on arguing for a tax increase and perhaps put their money where their mouths are.

Related posts:

1. One More Obama Nominee with Tax Problems

Right now the city of Philadelphia has about $1 billion in back taxes and tax amnesty programs in general have helped many state and city governments recoup taxes they may have never received. In December of last year, Keith Richardson, the Philadelphia Revenue Commissioner stated the city would most likely give delinquent taxpayers 45 days to pay their taxes without penalties and only half the interest that has accrued. What happened is that Philadelphia decided to give a longer tax amnesty than 45 days. The program started on May 3rd and ends June 25th, 2010.

Whether you have City, State, or Federal tax debt or unfiled taxes, it is in your best interest during these economic times to come into compliance with tax authorities as interest and penalties will only increase your balance and make things worse.  To find more information about this tax amnesty, visit www.phillytaxamnesty.com today.

Related posts:

1. Oregon State Tax Amnesty for Back Taxes Ends 11/19
2. Massachusetts Tax Amnesty: Waive MA Tax Penalties 4/1/10 to 6/30/10
3. Maryland Tax Amnesty Will Last for 2 Months

Past due taxes

Consequences and Penalties of Past Due Taxes

The consequences for past due taxes vary as greatly as do the reason for the past due taxes and amount past due. Plainly speaking failing to file taxes is criminal behavior. An individual who has past due taxes can expect anything from a slap on the wrist paltry penalty fee to wage garnishing to lengthy prison sentences and seizure of any and all assets. In general a taxpayer can avoid almost all consequences of past due taxes simply by filing any past due tax returns as soon as possible, as long as they are filed before the Internal Revenue Service catches on that they have not been filed. If you owe millions and have not filed any taxes in years, you can expect the Internal Revenue Service to prosecute you to the fullest extent of the law with as much publicity as possible in order to scare others into filing and paying what they owe in a timely manner.

What Should You Do if You Have Past Due Taxes

As stated previously if you have past due taxes, whether you would have received a refund or if you owe thousands of dollars, you need to get the proper tax forms filed as soon as possible. Even if you have no practical idea of how you are going to pay the amount owed. It is always in your best interest to file unfiled tax returns, as soon as possible, and do everything in your powers to demonstrate that you are a responsible tax payer and are willing to comply with all tax laws. Failing to file taxes and ignoring the IRS and their attempts to work with you to collect whatever is owed will only force them to take all appropriate actions under the law. Failure to file tax returns for a period of greater than three years will forfeit an individuals right to any tax refunds. As far as the courts are concerned past due tax debt supersedes all other forms of debt. What this means is that even if you are filing bankruptcy, past due taxes are the first debt that will be paid off through the process of the bankruptcy proceedings.

The Internal Revenue Service may seem like the most evil entity ever created, there primary purpose is to take peoples’ money and turn it over to the government, dealing with the Internal Revenue Service can be absolutely torturous, but I assure you they are not evil. If you chose to earn money in this country then in most instances you will be obligated to pay taxes on those earnings. If you chose not to pay those taxes, you could face forfeiture of any possessions and future earnings of you can cooperate with the powers that be and pay what you owe, if you can’t pay it all at once they will gladly put you on a payment plan and charge you interest. For the best advice anyone who finds themselves in any type of tax predicament should consult a certified tax professional immediately.

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What the IRS Can Do

• Tax Felony Charge: Worst case scenario, the IRS can charge penalties up to $100,000 and can send an individual to prison for up to 5 years for unfiled taxes. This can happen if you are charged with a felony for not filing your taxes. This is a very rare occurrence and will likely only happen if there was something very deceitful that was done in order to evade taxes.
• Other Worst Case: This is more common than getting charged with a felony, but still very rare. The IRS can charge a penalty up to $25,000 for each year of unfiled taxes and can send the taxpayer to prison for 1 year for each unfiled tax return. If the IRS actually sent each person who didn’t file their tax returns to prison for one year, the US would have to increase their jails by 10,000% in order to house all the inmates. The IRS mainly sends individuals to jail to set an example, which is mainly why they go so hard after celebrities. The IRS likes to use the fear tactic on the US and they know that if they put a celebrity in jail it will get highly publicized and will help ensure people file their taxes.

What Will Likely Happen

• Common Tax Fraud Charges for Unfiled Taxes: When you have not filed your taxes with the intent of committing tax fraud, the IRS will typically triple the normal penalties for not filing your taxes. The IRS will charge 15% a month that the taxes remain unfiled and up to 75% of the total tax bill. So if the taxes remain unfiled for 5 months, 75% of the taxes owed will be charged as a penalty. The IRS typically does not go after individuals for fraud, and even if it was fraud it is difficult to prove so the IRS will normally just charge the normal civil penalties which are below.
• Common Civil Tax Penalties: The most likely scenario the IRS will charge the standard failure to file penalty.  The failure to file penalty is 5% a month, which can reach up to 25% of the total tax bill. So if the taxes remain unfiled for 5 months, 25% of the taxes owed will be charged as a penalty.

To top off all these penalties the IRS will also require you to pay interest on the outstanding tax liabilities that is owed. Many people get into trouble with the IRS when they realize that they cannot pay what they owe and they decide not to file. The most important thing for taxpayers to realize is that it is not considered a crime if you cannot pay your taxes, it is only considered a crime when you do not file your taxes. The IRS has an excellent, but slow, system of catching non-filers. It is always a good idea to file tax returns before the IRS sends notices, especially because of their unwritten rule to not prosecute voluntary filers. The IRS will find those taxpayers that have not filed and will charge them steep penalties. The easiest way to avoid these hefty penalties is to file a tax return each year, even if taxes cannot be paid in full.

Related posts:

1. Why the IRS Will Find You If You Don’t File Your Taxes
2. What if the IRS Filed My Tax Return for Me?
3. 67% of Americans E-Filed Their Taxes Last Year

The IRS uses a system called The Information Returns Processing (IRP) System. The IRP system collections information from third parties and stores all that information in one massive master file where it will later match up that information with individual taxpayer information that is provided. If you had any income from anyone else it is very likely that it will be reported to the IRS and this is the information the IRS will sooner or later use to track you down for unreported items or unfiled taxes. Most companies that pay you any type of income such as salary, pension, interest, dividends, etc, will require you to provide them with your SSN and tax information before they pay you anything, which is because the IRS requires them to report this information annually. Below are some common third parties that report your information to the IRS.

1. Your employer: If you have a job, your income will be reported by your employer.
2. Brokerage: If you own stocks, bonds, money market funds,etc, all proceeds will be reported.
3. Social Security Administration: If you receive social security benefits this information is sent to be stored in the IRS master file.
4. Casino: If you won a large amount of money a casino will likely require you to fill out your information before they pay you out and will later send that info to the IRS.
5. Unemployment: If you received unemployment, this income will be sent to the IRS to be checked off the master list.
6. Business you are a partner of: Are you part of a business? Your K1 information will be reported to the IRS when the business files their annual tax return.
7. Pension Funds: All pension income is reported annual to the IRS.
8. IRA: When you withdrawal from your individual retirement account these amounts are taxable and reported to the IRS.

The above list can go on and on depending upon your situation. It is very likely that you will have at least one company or person that is required to report payments to you over the year and this is the information the IRS will use to eventually find you if you did not file your taxes. It does take time for the IRS to analyze all this data and match off everything, but each year that passes their technology gets better and faster and they have been catching a greater amount of people at an increasing rate.

If you have unfiled taxes it is a good idea to get started right away with getting back on track. Penalties and interest add up very quickly on unfiled returns if you owe money. If you don’t owe money, you only have 3 years to claim a tax refund. So if you ever wondered if the IRS will find out you didn’t file, the answer is yes, it may take time but you can be assured they will be contacting you.

Related posts:

1. How the IRS Free File System Works: Who Can Use & Where to Find
2. What If I Didn’t File My Taxes or Request an Extension to File?
3. File Unfiled Taxes By 10/15 or Face More State and IRS Penalties

The Oregon State legislature approved SB 880, on 6/29/09 that provides tax amnesty for state taxpayers and businesses with back taxes stemming from 2007 or later.  Taxpayers who need to file or amend a tax return may complete and send in the application before the November 19th deadline (it started October 1st, 2009)  in order to abate or remove penalties. Moreover, those who come forward will also benefit because the total interest amount due will be cut in half.  The Oregon State Department of Revenue (ODR) states as well that unfiled tax returns or tax returns that need to be amended must be filed before 1/19/2010.

The amnesty applies to personal income taxes, Transit district taxes on self-employment, excise and corporate income taxes as well as trust and estate taxes.  If you received a bill  or notice of deficiency already from the ODR already for a certain year, you cannot apply amnesty benefits to those taxes from that year.

Oregon state, like many other states, passed this one time measure in order to increase tax revenues that are declining in this economic downturn. If you owe taxes, this is your chance to lower your tax liabilities inexpensively because interest will be cut by 50% and penalties are completely waived.

In order to apply for this amnesty go to the Oregon Amnesty website, and complete the application in the top left column for the years applicable to you. They even have a nice interest calculator so you can figure what you owe in interest under the amnesty program. Next, fill or amend your tax return by January 19, 2010 (write the word Amnesty at the top of each return) and pay the taxes owed plus interest.

If you have any questions regarding the Amnesty program you can contact the Oregon Dept of Revenue toll-free at 1-800-356-4222 or you can reach out to us.

Related posts:

1. Philadelphia Tax Amnesty Ends June 25th – Act Now!
2. Florida Introduces Amnesty Program to Provide Back Tax Relief
3. Massachusetts Tax Amnesty: Waive MA Tax Penalties 4/1/10 to 6/30/10

For the estimated 10 million Americans who requested a tax filing extension with the IRS or their State for the typical April 15th filing deadline, realize that this extension was only good for 6 months or until October 15th, 2009. As you probably know, you had to submit an estimated payment with this extension (if you are self-employed or don’t work for a company) because any filing extension is not an extension to pay but an extension to file. Essentially, an extension would have prevented a taxpayer from incurring any late filing penalties with the State or Internal Revenue Service. For any amount owed though, interest accrued for the amount owed for the last 6 months.

One thing to be aware of is many states have online filing systems that can help you quickly file your State taxes like California (CalFile), NY and others.  The IRS has Free File or E-File programs as well to help you quickly get the task completed. However, be cautious in doing this if you plan on itemizing deductions or expenses because your total liabilities will be much higher than if you complete your unfiled tax return with a tax professional or yourself. In relation to the IRS, if you don’t file your taxes eventually the IRS will file a Substitute For Return for you which means that they will just use what information they have on you (W-2, 1099s etc) and you will miss out on any deductions or expenses you wanted to itemize to lower your total tax liabilities.

If you have misplaced important filing documents like a W-2, or 1099, you can contact the IRS toll free (1-800-829-1040) or your State to obtain this information. The IRS will be happy to inform on the status of your account including any taxes owed, what estimated payments have been made, and so forth.

Even if you don’t have the ability to pay outstanding taxes with your State or the IRS, still file a tax return and reach out to a tax professional for help in trying to resolve or possibly settle for less than you owe. If you believe you are owed a refund, then work with a tax expert to ensure you get what is owed to you. Realize that the IRS and many states like California and New York offer Installment Agreements which are basically agreements between you and the State/IRS to pay back your taxes over time or in a series of monthly installments. Many people in this economic downturn are hurting, and Installment Agreements help taxpayers by allowing them to pay liabilities per month instead of all at once. The only downside to an Installment Agreement is you will end up paying more in the end that originally owed because tax liabilities and interest will accrue each month.

Overall, file your taxes as quickly as possible if you have or have not received a filing extension as the penalties and interest will continue to increase your total tax liability. If you did receive an automatic extension on April 15th, 2009, then make sure to file your taxes by this Thursday October, 15th. Work with a tax professional, or use a tax filing assistance program like TurboTax to get the job done instead of having your State or the IRS complete a return for you because again they will not include any expenses or deductions in your return. Tax advantage of the new home purchase tax credit of $8,000 (does not have to be paid back) if you purchased a home between 4/8/2008 and 12/1/2009, as well as teh health coverage tax credit, energy efficiency and renewable energy incentives, unemployment tax benefits credit, transportation, eduction 529 savings accounts and more if applicable which can be read on IRS.gov website or by contacting a tax professional team like us here.

Related posts:

1. What If I Didn’t File My Taxes or Request an Extension to File?
2. How to File for a 2009 Tax Filing Extension
3. Filing a 2011 Tax Extension: 2012 Deadline Dates & How to File