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There are plenty of possible explanations for why it happened: maybe that spring was really crazy and April blew by without you even thinking about taxes, maybe you were afraid you owed taxes and wouldn’t be able to pay, maybe you just strait up forgot.
Regardless of why, the simple fact is that you forgot to file a return and now you’re wondering, “Should I still file taxes owed from a prior year?”
The answer is “Yes,” and while it’s easy to forget, there are plenty of good reasons to file.
First of all, it’s the law. You are legally required to file your return (or apply for an extension) by the mid-April tax deadline. Failing to adhere could result in legal consequences. For most offenders this is a remote possibility, but just remember, you do run the risk of prosecution.
Legal consequences aside, there are two broad scenarios that could result from not filing taxes: one if you are due a refund and one if you owe back taxes.
You’d be surprised at the number of late filers who are actually due a refund. In fact, late filers are actually more likely to get a refund. Most people who miss the tax deadline imagine all sorts of dire consequences coming their way, even if it’s the government that owes them money.
File your taxes late and you could still get that refund, without being charged any penalties whatsoever. But there is a limit – only returns from the last three years can receive a refund. After that the statute of limitations kicks in. You can still file, but you won’t get any money out of Uncle Sam.
On the other end of the spectrum are those who owe the IRS money. The picture is significantly less rosy for them. For every day that your tax return goes unfiled you accrue a failure-to-file penalty and for every day your tax liability goes unpaid you accrue both a failure-to-pay penalty and interest.
The only way to stem the tide is to file your return and pay what you owe. Filing sooner rather than later will cut down on the damage. Remember, the IRS has ten years to find and punish tax delinquents before the statute of limitations kicks in, so it’s unlikely that you will be able to hide.
Aside from the penalties and interest there are plenty of other nasty consequences. Unfiled and unpaid taxes could prevent you from getting a refund in a future year and harm your credit score, making it more difficult to secure a loan for big purchases like a car or a house.
So you see, there are plenty of reasons to square away your unfiled taxes from a previous year.
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Source by Curran M Boomer
