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Unfiled tax returns are a paralyzing concept. That is, it usually begins with one missed year; the next thing you know, the mountain of unease and unopened mail arrives. Hopefully, you are reading this. After all, you have that knot of fear in your stomach, because you know what the consequences are, and you are too overwhelmed even to know where to start.

Relax. You are not the first one in this, and the way out is visible.

In Leading Tax Group, we have planned with thousands of people this very scenario. The next step-seeking information and deciding to act-is the most important. This guide is meant to cut the process into small, workable steps to get you out of the worrying and to a state of resolving.

Neglecting to file tax returns will never make the issue vanish. Actually, the IRS does act frequently without any legal action on its side. The impacts of further inaction may be dismal and expensive:

• Failure-to-File Penalties: The IRS might impose the so-called failure-to-file penalty. It is usually 5 per cent of the amount of unpaid taxes each month or quarter of a month that a tax form has become late. It can accrue 25 percent of your taxes paid.
• Interest on Short Payments: Where there is an underpayment, the interest charged on the payments is also compounded. The interest may also be imposed on the unpaid penalties. It accumulates daily, causing your debt to increase rapidly.
• Forfeiture of Tax Refunds: There is a statute of limitations when it comes to you being eligible for something like the loss of a tax refund you could have been entitled to during any one of those years that you did not file. But typically, that refund is only refundable within three years of the original due date. Once lost, the money then becomes lost to the U.S Treasury.
• Substitute for Return (SFR): It may happen that, without you filing a return, the IRS may file a return against you. SFR is rarely in your favor because it is computed with minimal deductions and exemptions, and that frequently leaves you with a considerably larger tax charge than you are in fact liable to shell out.
• Aggressive Collection Policy: This is because when tax issues have not been solved, then this may result in a levy of the bank, wage garnishments, and federal tax liens on your property.

Facing the problem head-on is the only way to solve it. Here is a clear, actionable plan.

This can first be done by determining which years should be filed. To be back in good standing at the IRS, you will typically be required to file the prior six years of returns with the IRS that have been filed delinquently. But, as may depend on your case, the details may differ. Never guess; make a list of all years in which you have not filed.

You will require all the necessary documents in order to make the right returns. This includes:

• Employer form W-2s
• 1099s (1099-NEC, 1099-MISC, 1099-INT, 1099-DIV etc.)
• Accounts of self-income and expenditure
• Documentation of all other income (real estate, investments, etc.)

What in case you lose documents? The challenge is something common. Luckily, the IRS can assist. You can request a “Wage and Income Transcript” for the years in question using the IRS’s Get Transcript tool online. The said transcript would demonstrate any reported income information that employers, banks, and other third parties would report to the IRS.

After getting your documents in place, the returns need to be prepared. Begin with the earliest year and flat-foot forward into time. That is because the previous year’s tax can occasionally influence the new one.

IRS Payment Plans (Installment Agreement): In case you owe a limited amount of money, you may seek approval to allow your pay in installments.

Offer in Compromise (OIC): It is an arrangement with the IRS to accept to reduce your tax debt to a lesser amount in comparison to the amount of money you owe. It is mostly given when uncertainty exists about whether the taxpayer will ever afford to pay the whole amount.

Currently Not Collectible (CNC) Status: You can request that the IRS cease (temporarily) collection efforts pending your financial situation improvement by proving financial hardship.

Making your way through years of unpaid taxes is tricky and scary. An error is expensive. Here, the assistance of a specialist is of value. A senior tax lawyer of the Leading Tax Group can:

• Get in direct contact with the IRS on your behalf: End the worries of phone calls and letters. All the correspondence is through us.
• Have Your Past Year Returns Ready Accurately: With our tools and experience, we will do it right so that you can get as many deductions and credits as possible.
• Defend Your Rights: We are knowledgeable about the rights of a taxpayer and make sure that you are fairly treated by the IRS all the way.
• Negotiation in the Best Possible Way: We can review your financial situation to assess whether you should consider an Offer in Compromise, penalty abatement, or another relief program, and in so doing, we may save you thousands of dollars.

The initial step is really the most difficult. Through this guide, you may start on the path back to financial peace of mind.

Although this is not written in stone and there is no rule set down officially, there is a policy at the IRS that establishes that most taxpayers need to file six years of returns in order to be in good standing. As part of the set conditions, however, the IRS may demand additional information depending on the case, such as high income or evidence of fraud.

This is the major fear most people could have, though it is very, very, rare. Tax evasion is a criminal act, though the IRS knows that evaders are the majority of the population who fail to file because they are not in a position to do so, or fear, or procrastination, but not an intention to evade. The main idea that the IRS is concerned with is putting the taxpayers under the system and collecting the taxes that people owe.

Possibly. There is a very limited time within which the claim of a refund can be made to the IRS. You have three years after the original due date (of the tax return) to file and claim your money. Using a case scenario, to receive a rebate on a 2021 tax year rebate (which was due in April 2022), it would be necessary to submit the said tax refund by the April 2025 deadline. When you do it beyond that window, you lose the refund.