This is part 2 of my series of blog articles on what to do if you have not filed tax returns for several [or many] years. You can read the first article in this series here.
The first thing you need to do is consult with an attorney. There are several steps involved in ‘coming correct’ after having not filed tax returns, and many factors to consider for each step. Because a non-filer is out of compliance with the law, among the most important considerations will be making sure the case is not inadvertently turned into a criminal case. This is where legal counsel will be critical: discussions with an attorney are protected by attorney-client privilege which means the attorney cannot be forced to report those discussions to law enforcement, nor testify in court. This is not true with other types of professionals, and is certainly not true with friends, family or business partners.
The next thing to do is to determine how many returns need to be filed. To an extent, this will be determined by how many years the taxpayer has not filed. If the taxpayer has gone for many years without filing, they may not need to file every single year. The taxpayer will also need to decide in what order past due returns should be filed with the state and federal tax authorities. This is where knowledge and experience will come into play: there is a strategy to using one tax liability to offset the funds available to pay other tax liabilities when it comes time to determine payment of outstanding taxes.
The taxpayer must consider precisely who will file the returns. Should those returns be filed as business or a personal returns? Married taxpayers must determine if personal returns should be filed jointly or separately. These decisions need to be made with an eye towards any eventual collection issues. The purpose of ‘coming correct’ for taxpayers who have not filed tax returns should be the peace of mind and financial stability that comes from full compliance with tax laws. This means the returns are filed and any outstanding tax liabilities are resolved.
Taxpayers who have not filed tax returns in several years need not despair. There are rules and a system in place to come into compliance. This system may be confusing and difficult to navigate, but the peace of mind and financial stability it brings makes the process well worth the effort. Many, many people have gone through the process and there are professionals who can help, if you or someone you know has not filed their tax returns and would like to discuss how to proceed contact me at 312 577-9405, or David@RatowitzLawGroup.com.