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Non-Filed Tax Returns

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Filing non-filed tax returns may not be as onerous as appear. We advise taxpayers always file their required tax returns timely even if they cannot pay the tax debt in full with the return. Taxpayers who have non-filed tax returns, may qualify for an installment plan.

Of course, they have to pay more in taxes, penalties and interest. Some with non-filed tax returns may be eligible for an offer-in-compromise, where they pay much less than they owe only filing non-filed returns. Eligibility for an offer-in-compromise depends on presenting taxpayers income, earning potential, expenses, assets and liabilities, under penalty of perjury.

If you do not file your tax return by the due date, including extensions, you may be subject to the failure to file penalty, unless you have reasonable cause for the failure to file.

If you did not pay your tax debt in full by the due date, excluding extensions, you may also be subject to the failure to pay penalty, unless you have reasonable cause for the failure, or the IRS has approved your request for an extension for payment of the tax due to undue hardship.

Taxpayers with non-filed tax returns also are charged interest on taxes not paid by the due date, even with proper extension. Non-filed tax returns also accrue interest on taxes and penalties. There is no penalty for failure to file if a non-filer is due a refund.

The problem is that after the expiration of the three-year statute of limitation (four years for California), the overpaid taxes will not be refunded or credited to other years. This rule applies to any credits, including overpayments of estimated or withholding taxes.

It is important to note that there is no statute of limitations for assessing and collecting the taxes if no returns have been filed. Generally, the IRS ceases collection effort on tax liabilities after ten years of assessment (twenty years for California)

Self-employed income of people with non-filed tax returns, are not reported to the Social Security Administration and will not receive credits toward Social Security retirement or disability benefits.

Bank accounts and other properties of persons with non-filed tax returns may be liened and levied by IRS and state agencies, based on substitute tax returns filed for them by those agencies. Liens and levies undermine and damage taxpayers credit worthiness in obtaining loans and dealing with any financial institutions.

We Can Help You

Zaher Fallahi, Los Angeles and Orange County Tax Attorney, CPA, assists clients with non-filed tax returns in filing non-filed returns, reducing tax debts, establishing installment plans, making offer-in-compromise for much less than taxes owed, and filing for innocent spouse relief.

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