There may be several reasons that individuals choose not to file their tax returns each year. However, failing to do so can result in missed opportunities to take advantage of deductions and credits that may lead to a refund. In more serious cases, taxpayers may also owe the Internal Revenue Service money, which can lead to hefty penalties, interest and legal action. Therefore, it's in individuals' best interest to file their returns and ensure any unpaid balances are settled quickly.
During these scenarios, working with a tax preparer is one of the smartest decisions a filer can make, according to Fox Business. This is particularly true in the case of a person who has missed several years of tax filings, because they are likely missing key information they will need to submit their returns - such as W-2s, 1099s and other documents. The IRS keeps duplicate records of any tax paperwork that an employer, bank or lender sends to a taxpayer, and a tax professional can help individuals secure these necessary documents. Typically, the preparer may ask the filer to submit IRS Form 2848 Power of Attorney and Declaration of Representative. This generally means that filers don't have to deal directly with the IRS, which can be helpful if they are still in the process of organizing and deciphering their documents. Instead, they can direct IRS agents or officers to contact the tax representative directly.
Do statute of limitations apply for taxes owed?
Many people mistakenly believe that the three year statute of limitations for amending returns also applies when it comes to paying taxes owed to the IRS. This is not the case. The IRS generally has six years upon which they can criminally charge individuals with failing to file a tax return. However, there may not be a statute of limitations on paying money that is owed to the federal tax agency, and during this period, penalties and interest may continue to accrue.
Individuals who have a tax liability may be scared to file, particularly if they don't have the cash to pay their balance. But submitting overdue returns and exploring payment options can help filers tackle their balances more quickly - which can help lower the failure to file penalties they must pay - and potentially avoid litigation with the IRS.
For a more in-depth look at Liberty Tax Service, visit the Give Me Liberty! Magazine. Follow Liberty Tax on Facebook and on Twitter or contact Liberty Tax directly at 1-877-at-Liberty.