Few Californians look forward to Tax Day. However, the reputation of Tax Day as a day of financial reckoning is perhaps undeserved. While it is true that you can learn of large, unexpected tax obligations, most people will become aware of a large tax liability either prior to tax day or months thereafter when the IRS sends a letter or notice. While the tax bill that breaks the bank is commonly considered, the experience differs significantly for most people. Unfortunately, the fear that people will face huge tax liabilities upon filing, keeps many taxpayers from engaging in the tax system. Our Sacramento tax attorneys explain:
Ironically, succumbing to one’s fears regarding potential bad tax outcomes almost guarantees that one will face a less than ideal tax situation. Taxpayers who fail to file their taxes are potentially on the hook for failure to file and failure to pay penalties. Depending on the manner in which an IRS agent interprets the scenario, the taxpayer can also face additional obstruction or other tax charges. Finally, taxpayers who fail to file potentially forfeit their right to receive any tax refund they would otherwise be entitled to receive.
More than $1 Billion in 2013 Tax refunds Is About to Expire
According to announcements by the IRS Commissioner, John Koskinen, more than one million taxpayers are still owed tax refunds from the 2013 tax filing season. That is, 1 million taxpayers are entitled to their share of more than $1 billion in unclaimed tax refunds. The IRS estimates that the median value of tax refunds for this year is $763.
In addition to a refund of taxes that were withheld from your paycheck, filing taxes is also the only way to claim the Earned Income Tax Credit (EITC). Generally, taxpayers of low to moderate incomes benefit from the EITC. In 2013, the EITC was worth a maximum of $6,044.
It is also important to mention that taxpayers who did not file in one tax year are more likely to fail to file in subsequent years. If you are going to correct non-filer status for a single tax year, it often pays to look into additional instances of non-filing that may have occurred for the 2014 or 2015 tax years. Correcting all non-filing can produce a significant windfall while coming back into compliance with the U.S. Tax Code.
Taxpayers Have 3 Years to Secure Unclaimed Income Tax Refunds
Many people seem to incorrectly believe that once they have missed the tax filing deadline, they can no longer claim their tax refund. This is an erroneous belief. In reality, taxpayers have a three-year window in which they may claim their tax refund. Thus, because tax returns for the 2013 tax year were not due until April 2014, taxpayers have until April 2017 to claim their refund. Tax day falls on April 18, 2017, meaning that this is the last day a taxpayer can claim any tax refund from the 2013 tax year. If a taxpayer files their taxes after this date (and they may need to do so due to an IRS audit or other enforcement action), he or she will not be able to claim any refund.
No Failure to Pay or Failure to File Penalty Applies if you Are Owed a Refund
One of the main reasons why taxpayers are hesitant to file taxes after failing to file for one or more years is that they are afraid of facing non-compliance penalties. However, it is essential to note that in many cases this concern is not justified. If a taxpayer was entitled to receive a tax refund, then he or she is not subject to the late filing penalty.
Correct Failures to File and Secure Your Unclaimed Tax Refund With a Sacramento Tax Lawyer
A Sacramento tax attorney of the NewPoint Law Group is here to help taxpayers in California comply with all tax filing, reporting, and related obligations. We can help you come back into compliance with the tax code and claim any refund you may be entitled to receive. To schedule a confidential consultation, please call 1-800-358-0305 or contact us online.