If you did not file taxes for your business last year, there are a number of options the Internal Revenue Service has at its disposal to handle this issue. While being a business owner can be exhausting, and dealing with complex tax laws is often a daunting experience, failure to manage your tax liability could destroy your business and substantially impact your personal life. If you require assistance handling unfiled tax returns for your business, contact an experienced Roseville unfiled tax return accountant. The certified public accountants at Cook CPA Group know the devastating effects unfiled taxes can have on a business, and we are prepared to help you get your business back in the good graces of the IRS. Cook CPA Group is here to explain the consequences of failing to file business taxes.
Consequences for Unfiled Business Tax Returns
Failing to file tax returns for your business is a problem that can quickly spiral out of control if you are not careful. The IRS typically prefers to recover money for back taxes instead of immediately referring a taxpayer’s case for criminal prosecution. However, there are various other tactics the IRS could employ to pursue a taxpayer for unfiled tax returns. Our strategic business planning accountants can help you keep your business out of tax troubles.
The following is a list of penalties the IRS may utilize if a business owner fails to file their taxes.
Holding a Tax Refund
After filing a tax return, unless a taxpayer ends up owing money to the IRS, the taxpayer will be entitled to a tax refund. If you are owed a refund for a particular tax year, you must file that tax return within three years to claim your refund.
However, if the IRS discovers that you have unfiled tax returns, they can hold your tax refund until you handle your back taxes or until you provide the IRS with an acceptable reason for not filing your past due taxes.
Additionally, having unfiled business tax returns can also affect your ability to claim tax credits and other benefits on another tax return.
Filing a Substitute Tax Return
When a taxpayer does not act to correct their unfiled taxes, the IRS may act for them by filing a substitute tax return. A substitute tax return operates the same as a normal tax return, except the IRS may not use the deductions and tax credits that the taxpayer earned. As a result, a taxpayer tax liability can increase substantially.
Before filing a substitute return, the IRS will send the taxpayer a Notice of Deficiency. This letter gives the taxpayer 90 days to file a past due tax return or to dispute the substitute return before the IRS files it. It is in your best interest to reply to this letter if you want to avoid the imposition of a large tax bill due to your unfiled business returns.
Placing a Federal Tax Lien on Your Property
Placing a federal tax lien on your property is one of the most troublesome actions the IRS may take against a delinquent taxpayer. Once a federal tax lien is placed on your business property, the IRS will have an interest in all property owned by your business from real estate to financial assets. Depending on the formation of your business, a tax lien could extend to your personal property as well.
A federal tax lien is typically placed on a taxpayer’s property after the IRS assesses the taxpayer’s liability and sends the taxpayer a demand for payment. If the taxpayer ignores the IRS request for payment or the taxpayer does not pay the debt on time, the IRS may then levy all property they have claimed with the tax lien. A tax levy of property could cripple a business and cause various other issues for a taxpayer.
These are not the only options that the IRS has to pursue back taxes from a business owner. If you have unfiled back taxes, it is wise to settle this issue with the IRS before they discover it themselves. As mentioned, the IRS would prefer to recover delinquent tax payments before turning to criminal proceedings. As a result, you may be able to make an arrangement with the IRS to handle your back taxes or to request a tax penalty abatement.
The worst thing you can do as a business owner is to avoid communicating with the IRS, especially if you owe back taxes.
California Tax Return Accountants You Can Trust
If your business has unfiled tax returns from previous years, contact an experienced California tax return CPA. At Cook CPA Group, our skilled accountants possess a wealth of experience handling unfiled tax returns for California businesses, and we would be honored to work with you. To schedule a free consultation to discuss your options, contact Cook CPA Group at (916) 250-3893, or contact us online.