Under federal law, individuals and businesses are required to submit their tax returns by April 15 of each year. As an individual, you can request an extension that gives you until October 15 to file your return, provided that you do not owe the IRS money. If you do not file your return in time, you may face significant consequences. There might even be criminal penalties for a failure to file your returns. The question is: what should you do about it if you learn that you did not file your tax returns in time? An experienced tax lawyer from Thorgood Law Firm can help you with unfiled returns.
What Is Failure to File Under Federal Law?
The failure to file a tax return is a problem under federal law if you owe money to the IRS. You are not penalized for a failure to file if you are due a tax refund, but you do not always know until you complete your return that you do not owe taxes. Accordingly, you should never take the chance of delaying your tax return. Further, a tax refund is money that you are due, so it is better in your hands than in those of the IRS. You do not receive interest on your tax refund because you did not claim it in time.
If you owe money and you do not file a return in time, you can face significant monetary penalties. The IRS will assess a penalty of 5% of the taxes you owe for each month that you do not file your tax return, up to a maximum amount of 25%. If your return is more than 60 days late, the penalty is either $435 or 100% of the taxes that you owe (whichever is smaller). These penalties are in addition to the statutory rate of interest that the IRS applies to the outstanding amount. The IRS only makes exceptions in limited cases, such as serious illness or a natural disaster.
Criminal Penalties for Failure to File Your Tax Return
The IRS may choose to seek prosecution for your failure to file a tax return on time if you owe money. Here, the prosecutor must prove that you willfully and intentionally failed to file a tax return in time. If your failure to file a tax return was due to an oversight or a good-faith error, you may not be subject to criminal liability.
Failure to file a tax return is a misdemeanor, and it is punishable by up to a year in prison. You can also face a fine of up to $25,000 as an individual, or $100,000 as a business. The IRS usually will not prosecute you unless a failure to file involves either a pattern of repeated offenses or when you owe a large amount of money to the agency.
Failure to Pay Taxes
The failure to pay your taxes is different from the failure to file a return altogether. Here, you may have filed a return, but you did not pay the full amount of taxes that you owe. You may have made a mistake that caused you not to pay your taxes in full, or the IRS may have disallowed some or all of your deductions.
The failure to pay taxes is usually treated as a civil matter. The IRS is interested in recovering the amount that the agency is due, along with a penalty for the failure to file. The agency assesses a penalty of .5% for each month that you owe the taxes, up to a maximum of 25%. In addition, you must also pay interest on the full amount that you owe based on the statutory rate. As you can see, the amount that you owe can escalate considerably, especially when you owe taxes for a long time.
The IRS will not prosecute you if the failure to pay taxes results from an error, or even from a difference of opinion between you and the agency. The agency will seek to prosecute you for tax evasion if the failure to pay taxes is the result of fraud. Then, the prosecutor must prove that you willfully and knowingly attempted to avoid paying taxes.
What You Should Do if You Have Tax Issues
The IRS will not even begin to negotiate with you if you are not current on all of your tax returns. You should always work to remedy the tax issue now because it can get worse over time if you have not filed the law. If you are behind on your tax returns, you need to get current now. The longer you wait to file a return, the more likely it is that the IRS will prosecute. If you owe money, you can begin the negotiation with the IRS at that point.
If you owe taxes to the IRS, you also have legal options. You have the ability to negotiate with the IRS. You can agree on an installment plan that allows you more time to pay the taxes that you owe (in addition to the interest rate that the IRS applies). In addition, you can submit an Offer in Compromise to the IRS, and the agency may even agree to allow you to pay less than the full amount of money that you owe. A tax attorney can negotiate on your behalf, and they can work to mitigate any potential consequences that you may face for a failure to file or incorrect tax returns.
Contact a New York City Tax Lawyer Now
A New York tax attorney at Thorgood Law Firm can advise you when you have any issues related to your return. You need to take the initiative to contact a tax lawyer to discuss your issues. You can schedule a free initial consultation with a New York tax lawyer by sending us a message online or by calling us today at (212) 490-0704. Help for your tax issues is just a phone call away.
