You generate tax problems when you don't file your income tax returns with the IRS/State. After ignoring many notices to file a tax return, the IRS/state will ultimately prepare one for you, called a Substitute for Return (SFR).
The IRS/State uses income that has been reported to them, such as wages, interest income, subcontractor payments, sale of property, etc., and then assumes you are single, have no dependents, and uses the standard deduction.
Now you have a tax bill or a larger tax bill than expected, even though you didn't actually file a tax return. You also have created other problems. You can't get an installment agreement without filing the missing returns, even the SFR's. You can't submit an Offer in Compromise if there are missing returns. Bankruptcy won't clear off old years if those returns were not filed by you. And the IRS/State will continue to try to collect on the SFR billings.
While there are many reasons why a taxpayer may not file a tax return, you need to be aware of the following:
- The IRS may file "SFR" (Substitute for Return) Tax Returns for you. This is when you fail to file a return and the IRS/State does so for you.
- Because SFR returns are filed in the best interest of the government, the only deductions you'll see are standard deductions and one personal exemption.
- You will not get credit for deductions to which you may be entitled, such as exemptions for spouses, children, interest and taxes on your home, cost of any stock or real estate sales, and business expenses, etc.
- Failure to file tax returns may be construed as a criminal act by the IRS/State.
- This type of criminal act is punishable by one year in jail for each year not filed.
- Needless to say, it's one thing to owe the IRS/State money, but another thing to potentially lose your freedom for failure to file a tax return.
How Crest Tax Group Can Help
It is in your best interest to have your tax returns --- both personal and business --- prepared and filed on time, each and every year. Even if you are currently behind on filing tax returns from previous years, Crest Tax Group can help. Sooner or later, the IRS will discover your filing delinquency. The penalties and interest the IRS will assess due to unfiled tax returns and the corresponding unpaid taxes will quickly turn your tax situation into a nightmare. Left unresolved, the IRS will take very aggressive measures to collect any unpaid taxes, including garnishing your wages or issuing levies against your bank account or Social Security benefits.