Why The Government Should Just Do Your Taxes For You
The actual work of doing your taxes mostly involves rifling through various IRS forms you get in the mail. There are W-2s listing your wages, 1099s showing miscellaneous income like from one-off gigs, etc. To fill out your 1040, you gather all these together and copy the numbers in them onto the 1040 form. The main advantage of TurboTax is that it can import these forms automatically and spare you this step.
But here’s the thing about the forms: The IRS gets them too. When Vox Media sent me a W-2 telling me how much it paid me in 2017, it also sent an identical one to the IRS. When my bank sent me a 1099 telling me how much interest I earned on my savings account in 2017, it also sent one to the IRS. If I’m not itemizing deductions , the IRS has all the information it needs to calculate my taxes, send me a filled-out return, and let me either send it in or do my taxes by hand if I prefer.
This isn’t a purely hypothetical proposal. Countries like Denmark, Sweden, Estonia, Chile, and Spain already offer “pre-populated returns” to their citizens. The United Kingdom, Germany, and Japan have exact enough tax withholding procedures that most people don’t have to file income tax returns at all, whether pre-populated or not. California has a voluntary return-free filing program called ReadyReturn for its income taxes.
The Obama administration supported return-free filing, and Ronald Reagan touted the idea in a 1985 speech:
What Can Happen When I Dont File Taxes
When a taxpayer fails to file taxes, an array of consequences can be imposed following an audit or upon conviction of a tax crime. One the less serious side of the spectrum, a taxpayer can face fines for both their failure to file taxes and their failure to pay taxes. These penalties are computed for each full month or each part of a month where the tax obligation remained unfulfilled. Depending on the amount of the tax debt, these penalties and unpaid taxes can accumulate quickly.
One of the harshest consequences a tax non-filer can potentially face is tax evasion charges. Tax evasion is a felony and carries a federal prison sentence. Normally, one cannot face tax evasion charges for failures to take action or inaction. Thus, the question taxpayers sometimes ask is, How can I face tax evasion charges when I didnt do anything.
In truth, this characterization of not doing anything obscures the fact that prosecutors can bring tax evasion charges against tax non-filers when there is a last affirmative act of evasion. Essentially, a last affirmative act of evasion is any step or act that taxpayer takes to further their non-filing scheme or conceal their failure to comply with the U.S. Tax Code. Theoretically, a taxpayer who fails to file taxes for several years and then lies about it to an IRS agent could face tax evasion charges. Other acts in concert with tax non-filing that could potentially justify criminal tax evasion charges include:
Pay Social Security Taxes To Qualify For Benefits
Self-employed individuals have to pay Social Security taxes through their estimated tax payments and individual income tax returns. By filing a return and paying the associated taxes, you report your income so that you may qualify for Social Security retirement and disability benefits when you need them.
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When The Feds Do Your Taxes
If you’ve gone a decade without filing a tax return and nothing has happened, that doesn’t mean you’re off the hook. If you have any income at all, the agency can use that to essentially file a tax return on your behalf.
Tax experts note that almost any non-cash income you get is reported to the IRS. That could be pay stubs from a job, a 1099 from your bank or brokerage, money from a gig or side hustle or earnings from selling on Amazon or eBay.
If you haven’t filed a return, the IRS can use all that information to automatically create a tax return for you something known as an Automated Substitute for Return, or ASFR. Some 380,000 taxpayers got this treatment in 2019, according to the National Taxpayer Advocate.
Unlike your personal accountant, the ASFR program will assume the worst for the taxpayer: It takes into account income, but ignores any deductions they may be entitled to.
“Let’s say you’re married with five children that would really impact your taxable income. But the IRS doesn’t know that,” Olson said.
If you receive an ASFR, as with any tax notice, tax experts suggest reaching out to the IRS as soon as possible. After a certain period, if the IRS doesn’t hear from you it will start collection proceedings including such things as freezing your bank account or garnishing your wages.
If You Owe More Than You Can Pay
If you cannot pay what you owe, you can request an additional 60-120 days to pay your account in full through the Online Payment Agreement application or by calling 800-829-1040 no user fee will be charged. If you need more time to pay, you can request an installment agreement or you may qualify for an offer in compromise.
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Minimize Penalties And Interest
The IRS can penalize you if you dont file a return or pay any tax you owe by the deadline. Generally, the penalty for not filing is more than the penalty for not paying. You may also be charged interest on any unpaid tax balance.
Filing your back taxes and paying anything you owe may help limit the amount of interest and penalties youre subject to for missing the deadline.
What If I Cant Afford To Pay My Back Taxes
Even if you canât afford to pay taxes you owe in full, always file your return as soon as you can. Then you can request an additional 60 to 120 days to pay. Make this request either online through the IRSâ Online Payment Agreement application or by calling the IRS at 800-829-1040. There is no fee for requesting extra time to make payments.
If you need more than 120 days to pay off your full debt, you can request an installment agreement from the IRS where you make monthly payments until your balance is fully paid. If monthly payments are still unaffordable, you may qualify for an offer in compromise, which is when the IRS cancels your debt for a lesser amount than what you owe.
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Claiming A Late Refund
In most cases, you have three years to claim a refund. The three-year period starts with the original filing deadline. After that period is up, the IRS cannot send you a refund check. Your refund has then expired, so to speak. For instance, a 2015 tax refund would have expired on April 15, 2019 .
If you’re due a refund, there’s no penalty for filing the return late.
Penalties kick in only if you owe the IRS. If you do, the IRS will assess two different penalties plus interest. There’s a failure-to-file penalty . Then there’s the failure-to-pay penalty . And then there’s interest on the taxes you didn’t pay. The IRS sets the interest rate every quarter.
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The above article is intended to provide generalized financial information designed to educate a broad segment of the public it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.
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If You’re Entitled To A Refund The Answer Is Easy
Even if you didn’t file an extension, you have plenty of time to file if the IRS owes you a refund. In this case, the U.S. Treasury is happy to hang on to your money for as long as you’ll let them.
Specifically, you have up to three years past the original tax deadline to claim a refund you’re entitled to. So, you can file your 2016 tax return any time before April 18, 2020 , although I’m not sure why anyone would want to wait. By doing so, you’re essentially giving the Treasury an interest-free loan. After the three-year window is up, you forfeit the refund, which officially becomes a donation to the Treasury.
Irs Unclaimed Refunds Of $15 Billion Waiting For Tax Year 2016 Taxpayers Face July 15 Deadline
IR-2020-135, July 1, 2020
WASHINGTON Unclaimed income tax refunds worth more than $1.5 billion await an estimated 1.4 million individual taxpayers who did not file a 2016 federal income tax return, according to the Internal Revenue Service.
“The IRS wants to help taxpayers who are owed refunds but haven’t filed their 2016 tax returns yet,” said IRS Commissioner Chuck Rettig. “Time is quickly running out for these taxpayers. There’s only a three-year window to claim these refunds, and the window closes on July 15. To claim the refund, a return for tax year 2016 must be filed by July 15, 2020.”
In Notice 2020-23 PDF, the IRS extended the due date for filing tax year 2016 returns and claiming refunds for that year to July 15, 2020, as a result of the COVID-19 pandemic. As the IRS is issuing Economic Impact Payments to Americans, the agency urges taxpayers who haven’t filed past due tax returns to file now to claim these valuable refunds.
To collect refunds for tax year 2016, taxpayers must file their 2016 tax returns with the IRS no later than this year’s extended tax due date of July 15, 2020.
The IRS estimates the midpoint for the potential refunds for 2016 to be $861 that is, half of the refunds are more than $861 and half are less.
For 2016 tax returns, the window closes July 15, 2020, for most taxpayers. The law requires taxpayers to properly address, mail and ensure the tax return is postmarked by the July 15 date.
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Request Tax Documents From The Irs
Finding documents from previous years may be challenging for some. Thankfully, the IRS has a form you can fill out to request any tax information they have on file for you for a given year. Form 4506-T allows you to request a transcript of your tax return information, even if you haven’t filed a tax return. You can request information from the last 10 tax years.
The IRS will send the information it has on record, including information found on forms such as W-2s, 1099s, and 1098s. It won’t have information about deductions and credits you may qualify for, though, so you’ll still need to do some work on your own.
How Many Years Can You File Back Taxes
You can file returns up to three years old with TaxSlayer. If needed, you can file back further using paper filing. You can typically find the forms for earlier years on the IRS website.
The IRS typically does not investigate returns that are more than six years overdue. In other words, if your taxes are in question, your past six years of tax returns are usually the only ones that would be considered for auditing.
You can find more information about preparing a prior year return with TaxSlayer here.
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Documents For Tax Credits And Deductions
Tax deductions and tax credits reduce the amount of income tax you owe for the year . You may need to gather additional tax documents to claim specific types of credits and deductions. For example, you probably need to have a copy of Form 1098-T if you want to deduct college tuition with the lifetime learning credit.
Even if credits and deductions were changed or eliminated for future years, you can claim them if they were available for the tax return youâre claiming. Learn more about the difference between tax credits and deductions as well as the difference between different types of deductions.
Common documents you may need include:
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Receipts from charitable donations for the charitable contributions deduction
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Receipts for unreimbursed employee expenses, such as for travel or union dues
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Moving expenses if you moved for a job
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Documents showing the value of any casualty and theft losses, not including losses already covered by your homeowners insurance policy
Not Only Can You Still File 2016 Taxes But You Should Do It As Soon As Possible
The short answer is yes, you can still file a 2016 tax return. If you’re owed a refund, you can still claim it, and if you owe the IRS money, they’ll still be glad to receive it. However, the financial implications of filing late depend on whether you owe the IRS money or not, and if you had a legitimate reason for not filing before the deadline.
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What Is Irs Free File
The IRS Free File Program is a public-private partnership between the IRS and many tax preparation and filing software industry leaders who provide their brand-name products for free. It provides two ways for taxpayers to prepare and file their federal income tax online for free:
- Traditional IRS Free File provides free online tax preparation and filing options on IRS partner sites. Our partners are online tax preparation companies that develop and deliver this service at no cost to qualifying taxpayers. Please note, only taxpayers whose adjusted gross income is $72,000 or less qualify for any IRS Free File partner offers.
- Free File Fillable Forms are electronic federal tax forms you can fill out and file online for free. If you choose this option, you should know how to prepare your own tax return. Please note, it is the only IRS Free File option available for taxpayers whose income is greater than $72,000.
Find what you need to get started, your protections and security, available forms and more about IRS Free File below.
About IRS Free File Partnership with Online Tax Preparation Companies
The IRS does not endorse any individual partner company.
- A copy of last year’s tax return in order to access your Adjusted Gross Income
- Valid Social Security numbers for yourself, your spouse, and any dependent, if applicable
Income and Receipts
Other income
ACA Filers
File Electronically
Contact Information
So You Ran A Little Late And Forgot To File A Prior
Are you wondering if you can file a tax return all the way back, say, 6 years? The answer is yes, you can! This should not be confused with e-filing. The IRS has electronic filing available through October of the year your tax return is due. After that, taxpayers must paper file their returns no exceptions. The good news? Paper filing your tax return is pretty much just as easy as e-filing. Instead of submitting your tax return online, youll need to print and sign it. Then, all you have to do it mail it to the IRS. Easy, right? You can file prior-year taxes dating back to 2005 with PriorTax.
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Ways To File Back Taxes
If you miss Tax Day and need to file your taxes late for the current year, you can still e-file your return until November. The IRS announces in October when exactly it will stop accepting e-filed returns for that tax year. So if youâre filing 2020 taxes but miss filing by May 17, 2021, you still have until November 2021 to e-file.
If youâre filing a federal tax return from a previous year, you may need to mail a physical copy of your tax return to the IRS. You may be able to e-file your back taxes, but this is only available for certain tax years and through certain online tax-filing services.
There are three ways you can complete your back taxes.
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Made $72,000 or less in 2020? Use Free File
If you made $72,000 or less in 2020, you qualify to file both your federal and state return through free, easy to use tax preparation software.
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