Last Updated on: 26th July 2023, 08:29 pm

Getting Caught Up on Tax Filings
Figuring out that you made an error on your taxes can be a nerve racking experience. As soon as you realize that your mistake was simply forgetting to file your taxes, the anxiety may be accompanied by a bit of embarrassment.  Now you need help getting caught up on tax filings that you missed. Nevertheless, your biggest concern is two-pronged. On the one hand, you are concerned about how much this filing error will end up costing you in fines and penalties. On the other hand, you just want to know how to go about fixing this filing error in a manner that mitigates or at least doesn’t exacerbate the tax consequences you are probably already going to face.
The IRS reports that up to 20 percent of the tax gap is attributed to the non-filing of taxes. Because of this, the identification and prosecution of taxpayers who fail to file when they are obligated to do so is a priority for the IRS and U.S. government.  For example, the state of California is far more likely to criminally prosecute simple non filing that the Federal Government is. Taxpayers who fail to file may be looking at significant penalties for their noncompliance. On the other hand, those taxpayers who act proactively and make good-faith efforts to fix their past filing errors may be able to lower or eliminate the penalties due and any potential criminal tax exposure connected to non-filing.
The Consequences Connected to Failure to File
When taxpayers do not file their taxes, they become ineligible to receive any tax refund they may be entitled to receive. Furthermore, taxpayers who don’t file their return within three years of its original due date forfeit any right to claim a tax refund that was otherwise due them. Before considering the potential penalties and other negative consequences that can be imposed for non-filing of taxes, there is already a big incentive for U.S. taxpayers to make their annual filings and work towards getting caught up on tax filings.
Taxpayers who fail to file an income tax return in a timely fashion can face a failure to file penalty. The penalty gets assessed at five percent of an unpaid tax bill for every month or part of a month where the obligation remains unpaid. This fee maxes out at 25% after being late 5 months.  Failure to pay penalties may also apply. On top of that, taxpayers who fail to make their own tax filing have the option to have their taxes filed on their behalf through a substitute return (IRS) or proposed assessment (FTB). Although the prospect of having the IRS or FTB deal with your taxes for you can sound tempting, the fact is the taxing authorities will not work out your taxes to your benefit. In fact, taxpayers who face this kind of situation are often served a hefty tax bill because the IRS will prepare your taxes in their favor and not yours by ignoring numerous available deductions. Combined with the penalties that can be imposed, a small mistake of falling out of the system can rapidly add up to a major tax liability.
Steps You can Take to Correct a Missed Tax Filing Obligation
When a taxpayer is noncompliant with tax obligations, they should strive to correct the problem as soon as is practicable.  Each tax situation is different and most taxpayers would be prudent to meet with a tax professional prior to filing. Meeting with a tax professional can help you get a better understanding of your level of risk in coming back into compliance with the U.S. and state Tax Code. For taxpayers who simply forgot a filing deadline, filing quickly thereafter may be sufficient. On the other hand, those taxpayers who may have additional offshore tax concerns under FBAR or FATCA, simply filing the missing tax returns may not be nough and thus potentially exposing the taxpayer to significant civil and or criminal liability. When there is an additional offshore disclosure issue, a taxpayer is likely better off engaging in the full blown or streamlined Offshore Voluntary Disclosure Program (OVDP) or one of the other programs that provide greater insulation and protection than there would be with a quiet disclosure.
If there are no additional tax issues, it behooves the taxpayer to file his or her missing return or returns as quickly as they can. It is critical that the returns filed are true, accurate and complete.  This is because non-filers are subject to increased odds of getting hit with an audit.  One must be careful not to compound the pressure from non-filing with the exposure to possible income tax evasion charges while they are attempting to become compliant. Furthermore, should the taxpayer owe any money to the government, he or she should pay as much as possible, as quickly as possible. Because non-filing and non-payment penalties are calculated on the basis of the amount of tax due and owing, lowering the outstanding balance will also reduce the penalties that can be imposed. An additional point to consider, with the assistance of a tax attorney, is whether the taxpayer’s failure to file or pay was connect to a reasonable cause. Reasonable cause for delay could possibly result in the waiver of fines and penalties.