How the IRS handles Unfiled Tax Returns
Unfortunately, when an individual or business is a non-filer and does not file a tax return, they are typically not aware of the IRS being able to file one for them. The IRS has a program known as the Substitute for Return Program, in which taxpayers who do not submit a tax return of their own can file a standard tax return. The bad part, however, is when the IRS files a new tax return; the taxpayer often owes the IRS money. This happens because the tax return that the IRS files does not maximize taxpayer deductions, expenses and exemptions. The unfiled tax return process can therefore swing from collecting a tax refund to owing money to the IRS.
The risk of not filing a tax return goes beyond the possibility of the money owed to the IRS. Social Security, Disability and Medicaid benefits are based on the lifetime earnings of a person reported to the Department of Social Security and the IRS. Most state-sponsored programs such as Unemployment Insurance and Compensation are solely dependent on reported income, and a non-filer may not receive full unemployment compensation because a tax return has not been completed.
Although it is a crime to not to file a tax return, many taxpayers that are non-filers and have not filed a tax return are largely at financial risk because the IRS imposes fines and compounding interest on non-filers’ tax debts. The interest and penalties can reach 47.5 percent. The IRS can also impose criminal and civil actions against non-filers.
A non-filer is often levied by the IRS on the outstanding tax amount of their unfiled tax return. If a taxpayer is fined or penalized by the IRS, the IRS will begin seizing the money within their bank accounts and garnish their future wages. Tax levies are the usually the standard for non-filers. The unfortunate part is that in most cases when people are penalized or have wage garnishments by the IRS, they don’t owe the money that the IRS receives.
Contact Anthem Tax Services tax relief for expert help on unfilled tax returns.