Ask the Accountant

Q. I missed filing my income taxes a couple of years ago. I haven’t heard from the IRS about it yet. How long will it be before I can stop worrying about this. Also, since I probably didn’t owe much because I was unemployed at the time, what kind of costs would I face if I contacted them and tried to square things up?

A surprisingly large number of people do not file out of a fear of filing. They don’t start out with the fear, but through a probably unintentional problem, not usually caused by them, they miss a deadline and don’t file a return for a given year. When the due date for the next year’s return comes around, they push it aside not wanting to file until they correct their neglect for the prior year. This process continues each year until the IRS or their state tax authority catch up with them — and then they have a serious problem.

Here are a few suggestions for those with a “fear of filing:”

File as soon as possible. Since a push is usually needed to get started, they should take whatever information they have, shove it into an envelope or bag and bring it to a professional tax preparer who will sort through it, organize it and actually be able to get a handle on how your returns will look.

Going to a tax professional before you are contacted by the IRS will serve to mitigate any possible criminal penalties since you demonstrated a desire to correct the problem.

If you do not have all your information, you should make good faith reasonable estimates and disclose that on the returns that are filed.

I suggest doing the returns yourself or going to a professional preparer. I would not recommend going to the IRS for assistance with the preparation. You can, however, go to the IRS to request copies of income statements that have been filed with them if you do not believe you have everything you need to complete your returns.

Late-filed returns where tax is owed will be subject to late filing penalties of up to 25 percent and late-payment penalties also up to 25 percent as well as interest at statutory rates. It is possible for late-filing penalties to be abated but very unlikely for multiple late filed returns.

Those entitled to refunds will receive them unless the return is greater than three years delinquent in which they will forfeit the amounts they would have been entitled to. No interest will be paid on the refunds.

Like any other fear, it can be conquered by dealing with the matter at hand.

Ed Mendlowitz is a partner of WithumSmith+Brown, New Brunswick. Participants in Ask the CPA are members of the New Jersey Society of Certified Public Accountants. More information is available at NJSCPA’s public service website, MoneyMattersNJ.com.