Missing Tax Returns

What Are Missing Tax Returns?

As tax attorneys it is pretty common we work with individuals and businesses who have not filed certain tax returns and hence, have “missing tax returns.”  The reason most individuals or businesses have these missing returns generally runs a common theme.  The individual or business owed taxes to the Internal Revenue Service, or once the taxpayer knew tax would be due and owed and they could not pay, they decided to not file the tax return and perhaps continued to not file tax returns thereafter.  The missing returns could be 1040 Individual Income Tax Returns, 1120 or 1120S corporate income tax returns or 941 employment tax returns.  Regardless, missing tax returns with the IRS needs to be dealt with properly.

Why Do Missing Tax Returns Cause Problems? 
Having unfiled or missing tax returns creates many problems and compounds the overall tax situation.  Below are a few examples of problems created when a taxpayer has unfiled tax returns with the IRS.
 
1)      If taxes are due to the IRS, but returns are missing, the IRS will not consider or accept resolution proposals to resolve the tax debt until these returns have been filed and the taxpayer is in filing compliance.  That is right, filing compliance is mandatory for the Internal Revenue Service to formalize and establish an installment agreement, an offer in compromise or even consider a proposal.  Being current and compliant would be defined as having all current tax returns that are due as of the current date filed with the IRS.  Taxpayers can find themselves stuck between a rock and a hard place when certain returns have been filed and tax is due, and yet other returns are missing and have not been filed.  This occurs because the IRS will work to collect on the past due tax, even if enforcement is required by the IRS but will not formalize an agreement until all outstanding returns have been filed.
 
2)      There are large penalties for not timely filing tax returns!  The failure to file penalty accrues very quickly at 5% per month up to 25%, and can be a hard penalty for the IRS to abate.  Thus, if you owed $20,000 in tax, and file the return 3 months late, you will have accrued an additional $3,000 in penalties!
 
3)      Failing to file tax returns can be considered a criminal matter, and taxpayers may be prosecuted when returns are not timely filed.  It is generally much better to file the returns before the IRS contacts you regarding the missing tax returns.  Further, if the IRS files a return for you or proposes an additional assessment of tax there are additional penalties that can be assessed.
 
4)      If a business that is a pass through entity such as an LLC or S corporation has failed to file returns, the individual owners of the business will not have the necessary K-1 to file their individual income tax returns.  Again, the issue and problem as a whole is compounded.
 
The above are just a few examples of the problems and issues created when tax returns are late or unfiled.  There is some good news though!  The problem can generally be resolved by having the returns prepared, filing them and moving forward with a resolution to any tax liability.  Even if you do not have your tax forms and records, the IRS likely has your wage & income information, which can be used to prepare the returns, or assist you in reconstructing data and records.
 
If you have unfiled returns, contact The McGuire Law Firm to speak with a tax attorney.
 
The McGuire Law Firm offers a free consultation with a tax attorney.