There is no way to avoid death or taxes. Postponing either may be possible, but in the case of taxes, the longer the postponement, the more painful the possible outcome. There are some completely legitimate reasons that a tax return does not get filed, but estimated taxes must be paid even if the actual return submission will be delayed. If there are back taxes owed, postponing the inevitable will only make a bad situation worse. Taking action to file returns, regardless of what the delay to date, will not only reduce interest and penalties, but may keep the Internal Revenue Service from wanting to prosecute you. If the IRS must come after you to get their taxes, the enforced tax collection process can be very unpleasant.
If your records have been lost or destroyed by natural disasters such as floods or fires, or perhaps your house was burglarized and papers stolen along with belongings, then you particularly need the assistance of a tax attorney or accountant. These professionals are accustomed to dealing with such situations. There are many ways to reconstruct records. An experienced and knowledgeable tax accountant or attorney will have the skills and tools to locate duplicates of record, and they will know what tolerances IRS has for proofs when there is a legitimate reason why original records are unavailable. Although difficult, recreating information for up to 15 or 20 years has been done, and the tax returns successfully filed and accepted by IRS.
Many taxpayers are honest people who have always paid their taxes until some unexpected situation made paying impossible. The family may have had a medical emergency or recent job loss. Money to pay taxes owed for the previous year may have evaporated. Since they do not have the funds to pay the taxes, they fear the repercussions if they file a return. What they need to know is that there are provisions for filing a return without payment of the taxes, so that they have at least complied with the law. They can save additional tax penalties of 25 percent for failing to timely file a return. Some states will impose hefty penalties even if no taxes are owed, on those who failed to file.
Obviously it would be a great time saver if you still had the information on all returns from previous years. But the only solution to your stress and worry is to bite the bullet, start the process and get the returns filed. You need the assistance of a professional because the delays have complicated the filing process. An experienced tax attorney or accountant has guided many other clients through the same legal maze with success. They understand your fears and concerns, and they also understand how to help you through the process and assist you in dealing with the IRS.
IRS does not allow taxpayers to file their tax returns online if they are filing to pay back taxes owed. These returns must be submitted on paper as the IRS will take an extra-hard look at them and will not deal with electronic returns. A wise move is to send the returns certified mail, and have the post office return proof the filing was received, in order to have proof that IRS did receive the returns and to document the dates mailed and received.
Filers who end up owing taxes will incur some interest and possibly penalties. The IRS will work with taxpayers who want to pay their taxes and who may need to make payment arrangements.
IRS wants people to file their tax returns. Taxpayers who want to be totally up front and get back on track will find the process fairly quick and simple. The mistake that will cause the biggest problem is to take no action at all. Ongoing failure to take action and file returns, with or without payment of taxes, is hard to justify in the opinion of the IRS. Honest efforts to do the correct action as soon as possible will usually prevent the most severe consequences. Putting off the obligation will only increase the costs and penalties.
File Back Taxes by Steven Patterson