Don’t Go to Jail! Here’s What to Do If You Have Failed to File a Tax Return

Results of Failing to File Your IRS Returns. If you have late tax returns, you face several possible bad consequences:

o Penalties. If taxes are owed, a delay in filing may result in penalty and interest charges that could increase your tax bill by 25 percent or more.

o Lost Refund. In order to receive a refund, the return must be filed within 3 years of the due date. If you snooze, you lose…YOUR REFUND!

o Lost Earned Income Credit. Taxpayers who are entitled to the Earned Income Tax Credit must file a return to claim the credit even if they are not otherwise required to file. The return must be filed within 3 years of the due date in order to receive the credit.

o Lost Social Security Benefits. If you are self-employed, you must file returns reporting self-employment income within three years of the due date in order to receive Social Security credits toward your retirement.

o JAIL!!! Willful failure to file a tax return is a CRIME. Non-filers of tax returns need to act quickly to avoid criminal prosecution for failure to file a tax return. If you have late tax returns, do not delay another day; delaying can cost you your freedom. Even if you believe that you have paid all the taxes you owe through withholding, or by your employer, the willful failure to file a return is a criminal offense. The best way to avoid criminal prosecution relating to late tax returns is to remedy the situation voluntarily and submit all unfiled tax returns. The IRS is far less likely to pursue a criminal prosecution if you take the first steps in resolving the issue and get all delinquent tax returns filed.

Prosecution Statistics for Non-Filer Cases:

In FY 2006 the IRS obtained:

o Indictments in over half of the non-filer cases it criminally investigated!

o Convictions in approximately 88% of the cases that were indicted!

o Jail time in 80% of the cases convicted!

o Average jail sentences were 40 months long!

File All Tax Returns

You should file all tax returns that are due, regardless of whether or not full payment can be made with the return. Depending on your circumstances, nonfilers with late tax returns may qualify for a payment plan.

In short, delay does not help your situation. If you are a non-filer with delinquent tax returns, you need to file those late returns as quickly as possible.

Documents Required to Prepare a Return

In order to assist with preparing a tax return, taxpayers should bring any and all information related to income and deductions for the tax years for which a return is required to be filed. Some of the documents may include:

o Forms W-2 – Forms from employers showing wages for the year.

o Forms 1099 – Forms from banks and other financial institutions showing interest and dividends. Forms 1099 also report self-employment income.

o Information on expenses to claim on the return, such as itemized deductions, child care expenses, or employee business expenses.

o Social Security numbers for dependent children and any other person claimed as a dependent.

Copies of the last tax returns that you filed.

Can I File By Myself…or Do I Need a Lawyer?

Nothing requires you to hire an attorney to file late tax returns.

However, due to the fact that there is a possibility of criminal prosecution, you should STRONGLY consider hiring an attorney to help you file delinquent returns and protect your interests in the process.

Conclusion

Delinquent tax returns are a serious problem. Non-Filers should take immediate action to get late returns filed. Voluntary compliance can help reduce or eliminate exposure to penalties, interest, and possible criminal prosecution. Since willful failure to file a tax return is a crime, non filers should consider hiring an attorney to assist them with coming into compliance.

Tax Return Online Helps In Getting The Accurate Information

The accurate preparation of tax can actually prove to be a tedious as well as a time consuming task. Moreover, tax return preparation also requires a lot of expertise and domain knowledge as not just anybody and everybody can prepare accurate tax return details. Paying the accurate amount of tax and that also on time is something that everybody desires to do and so everybody wants to be prepared with their tax details before the tax return session comes in America. Precisely speaking there are two ways of going about it. Either you can get a CPA to do the work on your behalf or you can calculate the amount you have to pay as tax yourself. Preparing your tax return online is one of the best options that you can utilize for calculating your taxes. There are several sites on the web where you can calculate your tax return.

In fact, opting for tax return online can prove to be of great advantage to you as not only it is time saving but also gives out accurate results. Filing tax return online makes the entire process much eased out for you and also hassle free. Shortage of time is something that everybody complains of these days and if you can actually prepare and file your tax returns online, you will get benefit from this, as you will get to save a lot of your precious time. In addition, going in for a Tax Return Online also gets the work done more promptly and the calculations are highly satisfactory as you are satisfied that the calculations have been done more accurately. Moreover, the best part with tax return online is that you will be the person who will be doing the calculation so you will need to be more accurate with your calculations.

Filing your tax return online saves you from the hassles of dealing with an accountant or a CPA. When the tax return session comes, everybody gets all baffled while preparing to pay off their tax on time so that they do not face any serious problems. In fact, the tax-calculating season witnesses a heavy influx in the offices of the accountants and CPAs. This results in the over burdening of accountant with work related to the tax calculations and preparation of tax returns. Therefore, if you opt for tax return online you are saved from queuing up outside the office of the accountants, and that is not all, you will not even have to pay the accountant for calculating your tax return. Tax return online can be filed in a much simple way and in fact, it can filed at a much faster rate than filing it manually. Once you start filing your tax return online, the amount is automatically calculated. Moreover, this is also convenient as you can file the tax online at any point of the day.

Tax return online is one of the most convenient and easiest ways of filing the tax returns on time and this also helps in the accurate filing of tax. Therefore, you can now give your accountant some rest and go ahead yourself with the filing of tax return online.

Tips to a Successful Tax Return

Having the right team of advisors is critical to achieving your financial goals faster than you ever thought possible. For most people, taxes are the single biggest expense. This makes finding the right tax preparer for your team extremely important.

HOW DO YOU FIND A TAX PREPARER THAT IS RIGHT FOR YOU?

First, not all tax preparers are the same. I previously wrote an article about this last year titled: “Tax Returns – Are they really all created equal”, and you may be as surprised as other readers about just how much tax return preparation can vary.

In fact, I calculated the average savings I typically find from annual tax savings, reducing professional fees and audit assessments. In total, the average savings are:

– $23,750 Annual tax savings

– $5,000 Audit defense savings

– $10,000 Reduced audit assessment savings

– $50,000 Reduced legal fees

– $3,000 Reduced tax return preparation fees

This is a total average potential savings of $91,750! Your tax preparer does make a difference! How much more could you do with these savings?

Second, the right tax preparer for you depends on what is important to you. Take a minute to answer this question:

WHAT MAKES YOUR TAX RETURN SUCCESSFUL?

How you answer this question will impact what type of tax preparer you need on your team. I’ve asked this questions to clients, prospects and colleagues. I have compiled the most popular answers and what it means to you as you find the tax preparer for your team.

ANSWER #1: Paying the least amount of tax legally

Your tax preparer needs to:

– Know the tax law very well and know how to be creative legally.

– Ask you a lot of questions about your situation in order to understand your situation and goals.

– Have a review process where at least one other person reviews your return solely for the purpose of how to reduce your taxes legally.

HERE ARE SEVEN (7) QUESTIONS YOU SHOULD ASK YOUR TAX PREPARER TO DETERMINE IF IT’S A GOOD FIT:

Q1: Can you tell me about the other ___________ (your industry) you service?

A: Your tax preparer needs to know how the tax law applies to your situation. Having other clients in your industry or with similar investments indicates that the tax preparer is likely to be familiar with the tax laws that impact you.

Q2: Who will be working on my tax return?

A: It’s very common (and a good business practice) for tax preparers to have staff prepare your tax return. You want to make sure the other people working on your return have the same level of expertise.

Q3: What is your tax return review process?

A: Tax preparers who are focused on reducing your taxes will have this built into their review process. Usually it involves having another experienced tax preparer review the return solely for the purpose of finding ways to reduce your taxes.

Q4: What would you have done differently on my past tax return?

A: Show the tax preparer you are interviewing your prior year tax return. Creative tax preparers will be able to give you at least one idea of what you can do to reduce your taxes by looking at your tax return for just a few minutes. If it’s creativity you are after, this is a great question to ask! But don’t expect the tax preparer to give you all the details right then and there – that’s why you pay them!

Q5: How much can you save me in taxes?

A: While it’s difficult for any tax preparer to answer this in just a few minutes of looking at your past tax return, it is possible for them to know if they can save you taxes after spending 30 minutes with you.

Q6: What deadlines do you impose on clients?

A: This may seem like an odd question for minimizing your taxes but it has a direct impact. If your tax preparer allows you to provide your information a week before the tax return is due, it’s very unlikely that the tax preparer will have the time to focus on your return to truly minimize your taxes. Tax preparers that want to reduce your taxes want your tax return information early and will communicate that to you.

Q7: What recent tax law changes should I be aware of?
A: To minimize your taxes, your tax preparer needs to know the tax law inside and out, which includes the latest changes. Your tax preparer needs to be able to answer this question without hesitation.

ANSWER #2: Minimizing tax return preparation fees Your tax preparer needs to:

– Focus on the tax work and recommend someone else for the non-tax work (such as bookkeeping).

– Request tax information in a certain format.

– Require you to input your information online.

HERE ARE TWO (2) QUESTIONS YOU SHOULD ASK YOUR TAX PREPARER REGARDING MINIMIZING RETURN PREPARATION FEES TO DETERMINE IF IT’S A GOOD FIT:

Q1: What can I do to reduce my tax return preparation fees?

A: To minimize your tax return preparation fees, your tax preparer always needs to have your fees in mind. Ask your tax preparer what you can do to reduce your fees. If you don’t get at least 2 suggestions, your tax preparer probably isn’t thinking about how to keep your fees low.

Common suggestions include:

– Have someone other than the tax preparer do your bookkeeping. I am always skeptical when a tax preparer does the bookkeeping. First, they either charge an arm and leg or if they reduce their rates to accommodate you, it means they don’t spend their time entirely on tax issues, which could indicate their tax skills aren’t up to par.

– Organize your information. Don’t bring your tax preparer a shoebox! A tax preparer that is really focused on keeping your fees down will have forms, spreadsheets and other tools available for you to use to organize your tax return information.

– Enter your information online. Many tax preparers now require clients to input their information online. Accurately entered information can help reduce fees. Caution: Information that is entered inaccurately can increase your fees!

Q2: What is your fee structure?

A: Your tax preparer needs to be able to answer this question with confidence. Any wavering could indicate that the tax preparer knows the fees are too high for you but just doesn’t want to tell you. Unfortunately in these situations, you find out too late!

ANSWER #3: Reducing audit risk Your tax preparer needs to:

– Know the tax law very well and how to properly report your activity.

– Understand the IRS’s current “hot buttons” or “red flags.”

– Offer an audit defense plan.

HERE ARE FOUR (4) QUESTIONS YOU SHOULD ASK YOUR TAX PREPARER IN REGARDS TO REDUCING AUDIT RISK TO DETERMINE IF IT’S A GOOD FIT:

Q1: How many audits have you been through and what triggered the audit?

A: The most important part of this question is what triggered the audit. If it was triggered by how something was reported, then that may be something the tax preparer had control over (and may be a bad sign for you).

Q2: What was the outcome of the audits you have been through?

A: A return can be randomly selected for audit or selected because of a certain activity (even though it was reported correctly). So it’s important to understand the outcome of the audits. Was additional tax assessed or were there no changes? Additional tax may indicate that something was not reported properly.

Q3: Do you offer an audit defense plan?

A: Tax preparers that are confident in their work will offer an “insurance” program that covers their professional fees to handle your audit if your return is selected for audit.

Q4: What is your tax return review process?

A: Although tax returns can be selected randomly for audit, many are selected due to how items are reported on the tax return. Tax preparers who are focused on reducing audit risk will have a review process that includes another tax preparer reviewing your return solely for accuracy of reporting.

Be selective with the tax preparer you put on your team. The average savings I find for my clients is over $90,000! Your tax preparer makes a difference!