If you are a taxpayer you know you have to file your taxes every year by a certain deadline (for most people, it is in April). If by chance you fail to do so, you will be subjected to penalties and interests charged by the IRS. So if you happen to be late, is it inevitable that you will be penalized? If so, should you still file your tax returns even when you are late or should you just accept the inevitable? Click here to read or watch more IRS Help resources.
The answer is a clear “yes”. This is because if you file your taxes even if it is late, you will not pay as much in penalties and interest as you would if you skip filing for a year or more. So you should file your back income taxes as soon as possible even though you have passed the deadline. The longer you wait to file unfiled taxes you will have to pay more in penalties and interests. The penalties, interests will accrue until all your debt is fully paid off.
There is a possibility the IRS may file what is known as a substitute return on your behalf. This means the IRS calculates your income tax based on the tax returns you have made in the past. The substitute return becomes your tax return and would reflect the amount you owe in taxes. But in the case of a substitute return, the IRS will not include any deductions or credits that may lower your taxes or increase your refunds. Once a substitute return is filed, the IRS may initiate collection efforts like filing a lien or levy on your assets.
Even if the IRS has filed a substitute return on your behalf, you should still file your tax return claiming any tax credits or deductions you are eligible for. If you voluntarily file your tax returns, you will be taxed according to your filing and you will have the opportunity to arrange a payment plan with the IRS or even make an offer in compromise to settle your tax debt.
So it is always important you file your tax returns every year. If you skip filing even for one year, the IRS will catch up with you and you will be subjected to severe penalties, fines, and interests for as long as you have tax debt outstanding.