If you didn’t file your taxes last year, or in some other previous year, you may be feeling immobilized by indecision about what to do. That’s a natural human tendency, but there are several good reasons to address the situation now.
In this post, we will list three of them.
Limiting the amount of interest and penalties
Failing to file your tax return can result in substantial tax penalties and interest charges. There are actually two different penalties. One is for failure to file a tax return. The other is for failure to pay your taxes.
Failure-to-file and late-payment penalties are not only assessed by the IRS. Massachusetts can also hit you with these penalties. In our July 14 post last year, we discussed an amnesty program offered by the Massachusetts Department of Revenue to avoid state-assessed penalties in certain circumstances.
Access to credit
If you need to get a loan, you will likely find that unfiled tax returns make it more difficult to do so. This is because copies of recent tax returns are commonly used to support loan applications by showing proof of income.
The loan you seek could be for a car, a home mortgage or for paying college tuition for yourself or your child. No matter what the loan is for, unfiled tax returns can hinder the process of getting approved for credit.
Eligibility for an offer in compromise
Finally, it is important to be aware that in order to be eligible to apply for an offer in compromise (OIC), you must be current on your tax-filing obligations.
An OIC is a procedure that can enable you to resolve your federal tax debt for less than the full amount owed. But the IRS will not consider your application if you have unfiled tax returns.