A staggering 6 million American taxpayers fail to file their federal tax returns for any given year(s). For many, avoidance, whether it is a result of pure procrastination, and/or financial or emotional hardship, is perceived to be a simpler alternative than compliance.
However, failure to file tax returns will often create further complications and distress on the individual taxpayer. For example, failure to file and/or pay taxes may lead to liens, levies, penalties, and wage garnishments. On the other hand, the timely filing of tax returns has several advantages: avoidance of any penalties; obtaining tax refunds, which would otherwise be lost; and obtaining Earned Income Credit (EIC), or other applicable credits. Moreover, there exists a statute of limitations on refunds and credits which limits the time period the Internal Revenue Service (IRS) may issue deserving taxpayers a refund.
Furthermore, an individual may encounter a situation in which the IRS has filed returns for them. These returns are called “substitute for returns” (SFRs) and are filed without consideration of any deductions, expenses or credits and therefore the taxes assessed are typically much greater than what is actually owed. Consequently, these returns will need to be either originally refiled or possibly amended to include any deductions and/or credits thereby reducing the taxes owed.
In sum, it is important and beneficial to timely file federal tax returns.
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