3 Steps to Take for Individuals with Unfiled Tax Returns
September 25, 2024
3 Steps to Take for Individuals with Unfiled Tax Returns
Filing tax returns is a legal obligation for anyone and everyone earning an income above a certain amount in the United States.
But life can sometimes throw you curveballs, and filing taxes ends up being on the bottom of your to do list. Out of sight, out of mind, right?
Unfortunately, the IRS does not turn a cheek, and the potential ramifications for not filing your taxes can result in major consequences like penalties, interest charges, and even potential legal problems. The tax professionals at Advantage Tax Relief Inc.
in Itasca, IL have seen it all. If you have unfiled taxes and need help, contact our office today at 630-773-3200
for a free, no-obligation consultation.
For anyone with unfiled tax returns, pay close attention to all of the steps listed in this article.
Understanding Unfiled Tax Returns
Unfiled tax returns refer to the tax forms that individuals are required to submit to the IRS, but have not filed for one or more tax years.
Regardless of the reason, it’s important to not let too much time lapse. It’s always best to address your unfiled tax returns as soon as possible to avoid escalating any potential penalties and legal consequences.
Potential Penalties for Non-Filing
The IRS may impose some significant penalties and consequences for not filing your tax returns. Here are some of the more common penalties that they issue:
- Failure-to-File Penalty: This penalty accrues at a rate of 5% of the unpaid taxes per month, up to a maximum of 25% of the unpaid tax amount. It will apply to the net amount that is due after accounting for any payments and credits.
- Failure-to-Pay Penalty: If taxes are owed but not paid by the filing deadline, a failure-to-pay penalty gets applied. This penalty accrues at 0.5% of the unpaid tax amount per month, also capped at 25%.
- Interest Charges: In addition to penalties, interest accrues on the unpaid tax balance. The interest rate is determined quarterly and compounded daily, reflecting the cost of borrowing as set by the IRS.
- Legal Action: Continuously complying with filing requirements may result in legal action, including IRS collection efforts, levies on wages and bank accounts. In addition, you could also be facing a $10,000 fine, and a year in prison, for every unfiled income tax return, as it’s considered a misdemeanor in the U.S. for not filing a legally due tax return.
Steps to Take for Filing Overdue Tax Returns
While this information may seem alarming or overwhelming, don’t allow it to paralyze you from moving forward. It is crucial to take action.
You want to take care of your unfiled tax returns as soon as possible because the amount you will owe will just continue to grow.
Start taking action with these steps:
Step 1:
Gather Necessary Information
- Income Documents: Collect all W-2s, 1099s, and any other income statements for each tax year.
- Expense Records: Gather any and all receipts and documentation for deductions, credits, and expenses claimed.
- Previous Tax Returns: Obtain copies of previously filed tax returns, if available.
Step 2: Prepare and Submit Delinquent Tax Returns
- Download Forms: Access the necessary IRS forms for each tax year requiring filing.
- Complete Forms: Fill out the appropriate tax forms accurately, reflecting income, deductions, and credits for each year.
- Submit Returns: Mail completed tax returns to the IRS for each applicable tax year. Consider sending them via certified mail to track delivery.
Step 3:
Address Tax Payment Options
- Payment Plans: If taxes are owed but cannot be paid in full, consider applying for a payment plan (installment agreement) with the IRS.
- Offers in Compromise: In cases of significant financial hardship, explore the option of settling tax debts for less than the full amount owed through an Offer in Compromise.
- Penalty Abatement: Request abatement of penalties if reasonable cause can be demonstrated for the failure to file or pay taxes.
How Tax Relief Professionals Can Help
Don’t think that this has to be done all on your own! Tax relief professionals like the ones at Advantage Tax Relief Inc.
in Itasca, IL are a tremendous resource and may even help reduce the total amount owed.
Their expertise goes a long way. Here are just a few of the things that tax relief professionals can assist with:
- Compliance Guidance: Ensure accurate completion and timely submission of delinquent tax returns.
- Negotiation Skills: Negotiate with the IRS on behalf of the taxpayer to secure favorable payment terms or settlement agreements.
- Penalty Relief: Advocate for penalty abatement based on reasonable cause or first-time abatement criteria.
- Financial Analysis: Conduct a financial analysis to determine the most suitable tax resolution strategy, such as installment agreements or Offers in Compromise.
Addressing unfiled tax returns is vital for anyone seeking to regain compliance with IRS requirements.
Luckily, resources are available to you. Tax relief professionals play a crucial role in facilitating compliance, minimizing penalties, and securing favorable tax resolutions.
Contact the tax relief professionals at Advantage Tax Relief Inc.
with locations in Itasca, Naperville, and O’Hare Regent, IL. Call today at (630) 773-3200
to discuss your options.
Under the new One Big Beautiful Bill Act (OB3), qualified tips are any cash tip received by an individual with a valid Social Security number and in an occupation that 'customarily and regularly' received tips on or before Dec. 31, 2024. They include tips that are paid in cash or charged. The Treasury Department has not yet released the “official” list of occupations that qualify for the No Tax on Tips Regulations. It is expected, though, that the job titles will include but not be limited to those listed below: 1) Food & Beverage : Bartenders, Wait Staff, Servers, Chefs, and Cooks 2) Entertainment: Gambling Dealers, Change Persons, Booth Cashiers, Dancers, Musicians, Singers, Entertainers, and Other Performers 3) Personal Services: Personal Care Workers, Private Event Planners, Photographers, Videographers, Event Officiants, Pet Caretakers, Tutors, Nannies, and Babysitters. 4) Personal Appearance & Wellness: Skincare Specialists, Massage T herapists, Barbers, Hairdressers, Cosmetologists, Manicurists, Exercise Trainers, and Group Fitness Instructors. 5) Recreation : Golf Caddies, and Tour & Travel Guides. 6) Transportation : Ride Share, Taxi, and Food Delivery, Drivers, Porters, and Sky Caps. The final list is expected to be issued in October, 2025. Some implications of the No Tax on Tips Regulations. First , the deduction is for qualified tips of up to $25,000 per year regardless of how many employers you have during the year. The tax savings will be in the form of a tax deduction when you file your Federal tax return the following year. Second , qualified tips must be reported to the individual on one of three forms to be eligible for the deduction; a) Form W-2; b) Form 1099-NEC, Nonemployee Compensation; or c) Form 1099-K, Payment Card and Third-Party Network Transactions. Third , it only applies to Federal income taxes. It does not include State, Local, Social Security or Medicare taxes. Finally, the maximum annual deduction of $25,000 for single filers and $25,000 each for joint or married filing separately filers phases out by $100 for each $1,000 for taxpayers with modified adjusted gross income over $150,000 (or $300,000 for joint filers). How Advantage Tax Relief Can Assist You At Advantage Tax Relief, based in Itasca, IL, we have over a decade of experience helping individuals and businesses resolve tax issues. Our team specializes in offering personalized tax relief and tax resolution solutions tailored to your unique needs. We will work with you to assess your situation and explore your options, whether it’s an Offer in Compromise, installment agreements, or other strategies. Our experience allows us to identify the best path forward to ease your tax burden and guide you toward financial freedom. If you're facing tax debt, don't wait. Advantage Tax Relief is here to assist you with effective, professional help. Call Advantage Tax Relief today at 630-773-3200 to schedule a consultation and take the first step toward resolving your tax issues.
First, working overtime does not mean you are getting an automatic increase in your take-home pay because it is not going to be taxed. That is not what is going to happen. The tax savings will be in the form of a tax deduction when you file your Federal tax return the following year. There will be no immediate impact. Second, it only applies for Federal income taxes. It does not include State, Social Security or Medicare taxes. Third, it also only applies to the overtime premium and within certain deduction and wage limits. You can only deduct the pay that exceeds your regular rate of pay. The 'half' portion of 'time-and-a-half' compensation. For example, say you make $20 per hour and work 5 hours of overtime that week at time-and-a-half. The deduction would the Federal tax on $50 of premium pay. ($20 divided by 2 times 5 hours) Finally, the maximum annual deduction is $12,500 for single filers and $25,000 for joint filers. The deduction phases out for taxpayers with modified adjusted gross income over $150,000 (or $300,000 for joint filers).
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