Tax returns are complicated and confusing, so it is not surprising that every year, there are a number of people in DC who never get around to filing their returns. This process may repeat for years with no response from the IRS. But the problems that can result from unfiled tax returns in Washington DC do not go away over time — in fact, they increase.
Years of unfiled tax returns can hang over you like a ticking time bomb ready to shower you with fines, fees, interest, and legal proceedings that can prevent you from receiving Social Security benefits and can enable the IRS to seize your property or garnish wages. But taking action now can diffuse the problem before it becomes a true setback. Call a seasoned tax fraud lawyer today and set up a consultation.
Sometimes it seems like there are no consequences for failing to file a return, because the IRS does not appear to be taking any action. However, in many cases the IRS will file a return for a taxpayer based on income information received from employers, financial institutions and other sources.
While the IRS often receives information about income, it is less likely to have information about deductions or tax credits to which someone may be entitled. So on the return the IRS generates for taxpayer, the tax liability is likely to be much higher than it would be if the taxpayer filed individually.
In some cases, the IRS will send a taxpayer a notice form reporting that the agency has not received a taxpayer’s return and either requesting information or stating consequences.
Currently, the IRS uses more than a dozen different forms to report these deficiencies to taxpayers, such as a CP-63 Notice in which the agency notifies a taxpayer that it is holding a refund because the taxpayer has not filed one or more returns in the past or a CP-2566 Notice in which the agency states that it has not received a tax return and has calculated the taxes, penalties, and interest based on information provided by other sources.
Even if the IRS has not sent a notice regarding unfiled tax returns, the failure to file can cause numerous difficulties. If a taxpayer is owed a refund for a tax credit, withholding or payment of estimated taxes, that refund will be forfeit if the taxpayer does not file a return within three years of the due date.
Unfiled returns can also make it difficult to receive the full amount of Social Security benefits or obtain a loan.
If the IRS prepares a return for the taxpayer which generates a tax bill and the taxpayer does not pay this bill in a timely fashion, the unpaid tax bill can lead to a federal tax lien and because the IRS put a levy on wages or bank accounts. Repeated failure to file can trigger additional penalties and possibly even criminal prosecution. Therefore, it is essential to reach out to a lawyer who could help one with unfiled tax returns in Washington DC.
When dealing with unfiled tax returns in Washington DC, the worst course of action is taking no action at all because the negative consequences will continue to multiply. While the IRS may impose interest charges as well as penalties for failure to file and failure to pay, it is possible to negotiate a settlement reducing or eliminating many charges.
It is important to file back tax returns, but they may be based on the right evidence because back returns are often closely scrutinized. A DC tax lawyer can provide advice on how to handle a situation involving unfiled tax returns and also may be able to negotiate a lower settlement with manageable terms.
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