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Past-due returns, part 1: why it makes sense to to file now

Trying to minimize problems by avoiding the subject is a natural human tendency. Virtually all of us do this to some degree in various aspects of our lives.

But when it comes to filing your taxes, it is important to address the issue head-on. In this two-part post, we will discuss past-due tax returns, the consequences of failure to file, and steps you can take to resolve the situation.

There are many reasons why you might not have filed a return. It doesn't necessarily mean you were trying to evade your taxes. It may simply mean that you didn't have the money to pay them.

In any case, don't let the situation slide. You should file your tax return, even if you can't pay the bill. Then you can try to work out a deal with the IRS, though an offer in compromise or an installment agreement, to take care of the tax debt.

If you don't, the IRS may file a substitute return for you and deem your taxes to be delinquent. The agency could then initiate wage garnishment, impose a tax lien, or take other collection action.

You may also face substantial tax penalties for failing to file. As we discussed in our July 14 post, these penalties can be at the state as well as the federal level.

It therefore makes sense to file a past due tax return. This isn't merely a matter of avoiding penalties or collection and enforcement actions. There are also other consequences for not filing your taxes, such as making it difficult to borrow money. Obtaining loans can be problematic for non-filers because so many lenders use copies of tax returns to verify income.

In part two of this post, we will explain how a tax attorney can help you clear up issues involving a past-due return.

Source: IRS.gov, "Filing Past Due Tax Returns"

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