Penalties can include significant fines and even prison sentences. Fortunately, the government has a limited amount of time to file a criminal charge against you for tax evasion. If the IRS decides to file charges, you must do so within six years of the tax return due date. The penalty for filing a return after the deadline is 5% of the taxes you owe per month for the first five months, that is, up to 25% of your tax bill.
The IRS will also charge you interest until you pay the balance. After completing the questionnaire, it will tell you if the tax law requires you to file a tax return. However, when you file a tax return, the general rule is that the IRS cannot audit or apply new taxes against you more than three years after the filing date or the due date, whichever is later. You didn't have to file a return before or you didn't have to pay any penalties during the three tax years prior to the tax year in which you received the penalty.
See H&R Block Tax Audit & Notice Services to find a local tax professional who can consult the IRS for you. But remember that after three years have elapsed from the due date of your income tax return, you will no longer be able to apply for a tax refund. Let's look at the reality of the situation when you have unfiled overdue tax returns and what exactly to do about it to prevent potential problems related to tax evasion from becoming a serious problem. It's also possible for the IRS to garnish your state tax refund through the State Income Tax Program (SITLP).
The easiest way to determine if you need to file a tax return is to use the IRS Interactive Tax Assistant. While the VITA and TCE sites focus on preparing your taxes for you, the AARP sites focus on helping you prepare your own taxes. If you have these types of problems, the IRS can freeze your refund or apply the current year's refund to any tax bill you owe, just as the IRS would with any taxpayer who owes back taxes. You can also choose to reach a settlement agreement or any type of income tax forgiveness that applies to you.
If you file your tax return, the statute of limitations prevents the IRS from auditing your taxes for a particular year after 3 years have passed since you filed that return. Your tax professional can prepare and file accurate back tax returns, set up a payment agreement with the IRS for you, and resolve any other issues related to your overdue returns.