The Importance of Filing Your Tax Return on Time

Filing your tax return is more than just an annual obligation—it is a crucial step in setting the timeline for your tax responsibilities. The moment you file, the statute of limitations on your taxes starts. The IRS only has 10 years to collect your tax debt, but that statute of limitations never starts running if you do not file your tax returns. Also, when you fail to file, you lose important resources for reducing tax debt.

The Statute of Limitations and Its Role in Tax Filing

The statute of limitations is the period during which the IRS can audit your tax return, assess additional taxes, and take action to collect taxes owed. Filing your tax return on time starts this clock ticking. If you fail to file your return, the IRS can extend the time they have to audit you and collect the tax. In extreme cases, the IRS can attempt to collect taxes indefinitely if you do not file your return, because the statute of limitations is only triggered once the return is filed.

Why You Should Never Miss a Filing Deadline

Missing a filing deadline—especially if you owe taxes—can have serious long-term consequences. If you fail to file on time, you may incur penalties and interest, which can quickly add up. Additionally, the IRS may file a Substitute for Return (SFR), a tax return filed on your behalf, based on the income information they have on file. This typically results in a much higher tax liability because the SFR does not take your deductions or credits into account.

Moreover, by missing the deadline, you are not only increasing your tax burden, but you are also extending the time it takes to resolve the issue. The longer you wait, the more difficult it will be to resolve the debt and the higher the penalties and interest will continue to grow.

Ways to Resolve Tax Debt

If you find yourself in a situation where you owe taxes, do not panic—there are several options available to get you out of tax debt. Here are a few potential ways to resolve tax problems:

1. Bankruptcy: In some cases, taxes can be discharged in bankruptcy. If you meet certain conditions, including the age of the tax debt and filing your returns, bankruptcy may offer you a fresh start. This is particularly useful for those dealing with overwhelming debt and looking for relief from their IRS obligations.
2. Offer in Compromise: An Offer in Compromise (OIC) allows you to settle your tax debt for less than the full amount owed. The IRS will consider your ability to pay, income, expenses, and asset equity to determine if It will accept your offer. This can be a lifeline for taxpayers who cannot realistically pay the full amount of their tax debt.
3. Installment Agreement: If you owe taxes but cannot pay in full, you may qualify for an Installment Agreement. This allows you to pay your debt over time in smaller, more manageable payments, preventing the IRS from taking aggressive collection actions.
4. Innocent Spouse Relief: If you are married and filed jointly but were unaware of the tax issues caused by your spouse, you may qualify for Innocent Spouse Relief. This relief can protect you from liability for your spouse’s tax debt, particularly if you can prove you were unaware of the problem at the time of filing.

Take Action Now – Do Not Wait!

The longer you wait to address your tax debt, the more difficult it becomes to resolve. It is essential to file your tax return on time and take proactive steps if you owe money. Whether it is through bankruptcy, an Offer in Compromise, an installment agreement, or Innocent Spouse Relief, there are solutions available to help you.

If you find yourself struggling with tax debt, now is the time to act. Waiting only makes the problem bigger and harder to solve. Do not let tax debt continue to hang over your head—contact a qualified tax attorney today to discuss your options and start your journey toward resolving your tax issues. Just call (844)894-4440 to schedule your FREE TAX CONSULTATION.

Author: Jenny L. Doling, Esq., LLM Taxation

CA State Bar Certified Bankruptcy Specialist

NACBA – Vice President

San Diego Bankruptcy Forum – Immediate Past President

Serving Bankruptcy Clients throughout California and

Serving Tax Clients Nationally