Another tax season is almost upon us. If you have fallen behind in filing obligations, now is a good time to get caught up.
To be sure, not everyone has to file a federal tax return. Depending on your age, income and dependency status, you may not have to file at all.
Let's assume, however, that you should have filed a tax return, but for some reason didn't. In this two-part post, we will discuss some of the scenarios that can occur.
One thing that could happen is that the IRS could file a substitute return for you. If the IRS does this, it does not look to see which tax credits, deductions or exemptions you could have benefited from. Instead, the IRS proposes a tax assessment and sends you a Notice of Deficiency.
You have to respond to that notice within 90 days, either by filing your own return or challenging the IRS in U.S. Tax Court. And if you don't pay the taxes that the IRS has calculated, you could be subject to a collection action.
Of course, even when you get your return filed, you may not have enough money to pay your entire tax bill. But getting your past returns filed is one of the eligibility requirements for an installment agreement or an officer in compromise (OIC), two key IRS programs that can resolve your tax debt. You cannot get into either of those programs unless you file your back returns.
Finally, if you repeatedly fail to file your taxes, you could potentially become the target of a non-filer investigation. In such an investigation, the IRS Criminal Investigation division looks for possible tax evasion or tax fraud. We will discuss those investigations further in part two of this post.