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Tax Return Delinquency LifeBack Tax
Tax return delinquency is when a taxpayer did not file a required tax return within the deadline for its corresponding tax year. Because they are closely related to back taxes, delinquent tax returns may also be referred to as past due returns or back tax returns. Due to failure-to-file and failure-to-pay penalties, delinquent tax returns can have drastic consequences for taxpayers who owe the federal government. While the IRS has a ten-year statute of limitations on collecting taxes, this ten-year time limit only starts once a tax return has been filed.
The IRS imposes harsh late penalties on taxpayers who fail to file their tax returns on time unless the taxpayer filed for a tax extension, which extends the deadline by six months. This "failure to file" penalty for a past due return is based on the amount of tax owed and the amount of time after the deadline that the tax return is filed. However, even if the taxpayer was granted an extension on their filing deadline, their payment deadline remains unchanged, so they must still pay interest and "failure to pay" penalties on unpaid taxes. Since the "failure to file" penalty is typically much higher than the "failure to pay" penalty, a filing extension may be still desirable for some taxpayers. In extreme cases, taxpayers who fail to file a required tax return may even face criminal charges and imprisonment.
The IRS may choose to address delinquent tax returns by filing a substitute return for the taxpayer and billing them for the owed amount. Because a substitute return from the IRS does not account for exemptions or deductions, the taxpayer owes far more taxes than if they prepared the tax return themselves. Due to this increased tax liability, as well as late penalties and tax interest, delinquent tax returns can become very costly for taxpayers.
Taxpayers who anticipate a federal tax refund usually do not face late penalties from the IRS for an unfiled tax return. However, they must still file a tax return in order to claim their tax refund. If no tax return is filed after three years, the tax refund expires and is turned over to the U.S. Treasury. Additionally, by not filing a tax return, taxpayers may miss out on tax credits or exemptions, resulting in a much smaller tax refund. Depending on their state's laws, taxpayers may still be required to file a state tax return, even if they anticipate a state tax refund.
At Lifeback Tax Relief, we specialize in supporting taxpayers who are in dire straits with the IRS as a result of tax return delinquency. We will correspond with government agencies and assist you with filing any delinquent tax returns. These past due tax returns will replace any IRS-filed substitute returns with a corrected balance, allowing you to claim any relevant credits, deductions, and other tax breaks for the appropriate tax years.
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