The deadline for taxpayers to file their tax return is April 18, 2023. An extension could be requested to file by October 16. It is reported by the IRS that an estimated 11,000,000 taxpayers do not file their tax return each tax year. As a result, every tax year million of taxpayers leave unclaimed money for the Treasury.
Remember that the extension to file is not an extension to pay if you have a tax due. Interest and penalty for not paying start to accrue after the filing deadline. You only avoid the penalty for not filing when you request an extension.
There are some taxpayers who still file paper returns and did not request direct deposit. Consequently, some errors are more likely to go undetected and some checks went uncashed. An estimated of more than 2 million paper refunds, totaling $1.2 billion, went uncashed over a 2 year period. As reported, each year, almost 700,000 of uncashed refunds were under $50.00.
Taxpayers could potentially leave money to the Treasury when they do not file their tax returns.
The Treasury are waiting for some taxpayers to claim their tax refunds. Many taxpayers who did not file their return have unclaimed refunds left for the service because refunds could not be claimed after 3 years, except under special circumstances.
The IRS has authority under the law to prepare a substitute tax return, called Substitute for Returns (SFRs), on taxpayers’ behalf when they did not file. When that is the case, the taxpayer lost any deduction and credit that she may be entitled to. The statute of limitation rules does not exist in cases of 1) taxpayers failure to file a return and 2) assessment and collection of taxes on SFRs. Taxpayers should still file their own return after the IRS has prepared a return for them to claim the deductions and credits and to start the statute of limitations.
It is important for taxpayers to file their returns for several reasons:
- At least 2 years of tax returns is required for real estate purchases.
- A tax return is needed to file for student loan.
- Proof of tax filing compliance is needed for transactions with different government entities: local, state, and federal.
- Taxpayers need to be in compliance for the past 6 years to obtain an abatement, an installment agreement, an offer in compromise from the IRS.
- A tax return might be needed to apply for a loan.
- and so on…
It is important to file your tax return even when you might not owe or do not need the refund because you never know when you would need proof of tax compliance or proof of income.
Be proactive when it comes to your tax return. Do not wait until a proof tax compliance or income is needed for it might cost you much more and further, you might not be able to get it a the time needed.
A professional tax return preparer could, in many instances, assist taxpayers or businesses in the reconstruction of their income and expenses in cases where they do not have record or in cases where their record keeping is not sufficient.
Hiring a tax resolution expert is the best action a taxpayer could take during an audit by the IRS or a state Department of Revenue.
We offer FREE initial consultation!!!
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