Failure to File Tax Returns
Failing to file tax returns can lead to serious consequences, including penalties, interest, and potential legal action. While it’s easy to put off filing taxes, especially if you owe money or have complicated financial situations, neglecting this responsibility only makes matters worse over time. If you have one or more years of unfiled tax returns, it’s critical to take action before the IRS or New York State Department of Taxation and Finance (DTF) takes steps to collect what they believe you owe.
In New York State, it is considered a misdemeanor for each year that you intentionally do not file a tax return timely and rises to a felony when three or more consecutive years of tax returns go unfiled.
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New York State has an amnesty program for people with unfiled returns or underreported tax that the DTF has not yet discovered. If the DTF has sent notices or estimated assessments for the tax type and period of the unfiled returns, you will not be eligible for the program, so it can be critical to apply to the amnesty program right away, as it is impossible to know when the DTF will discover the issue on its own. Once accepted into the program, the benefits it offers are 1) protection from criminal prosecution for the tax issues disclosed, 2) abatement of all associated penalties, 3) a reduced interest rate on the taxes owed, and 4) the possibility of some of the unfiled returns being forgiven in their entirety.
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The IRS does not have an amnesty program with the many benefits of the New York State program. However, it is important to appropriately address any delinquent unfiled returns, which should be done with the assistance of a tax attorney who can help in handling tax resolution matters.
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If handled properly, the risk of unfiled tax returns turning criminal can be kept low in most cases.
In addition to the criminal risks, leaving returns unfiled opens the door to the IRS preparing substitute returns for you. An IRS Substitute-For-Return (SFR) will estimate what your return might look like and then assess the tax, interest, and penalties against you. When the IRS prepares an SFR, you still have an opportunity to prepare a true tax return to replace the IRS SFR.
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You have a limited amount of time to file your claim for a refund. Generally, you must submit your claim to the IRS within three years of the due date of the tax return or within two years of paying the tax, whichever is later. If you have multiple unfiled tax returns, you can easily lose refunds to this short timeline, so it is in your interest to address the situation quickly if you anticipate refunds showing on your returns.
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If you have unfiled tax returns, you could be exposed to serious consequences, both civil and criminal. These risks are usually manageable with the right legal counsel. The tax professionals at Metuku Law P.C. can help clients navigate these issues and achieve the best possible resolution. Call us today for a consultation to discuss your unfiled tax returns or to talk about other tax problems and how we can help you.
This communication is Attorney Advertising. It is presented for informational purposes only and does not constitute legal advice. Every legal situation is different, and prior results do not guarantee a similar outcome. This communication does not create an attorney-client relationship between Metuku Law P.C. and the recipient.