Penalties for late tax returns
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Dear Tax Talk,
My question is in two parts. I do not have my W-2s from 2005. One of the companies that I worked for went out of business.
I need to know how to get the W-2s. Will I get these back in time to file for this year? I have not filed for 2005.
Also, I am aware that I owe. Do you know what the penalties are? Basically I need to file for 2005, 2006, 2007 and 2008.
You need to hurry; actually, you need to file annually. The deadline for claiming any refund due to you for 2005 is three years from the due date of that return. Your 2005 individual return was due on April 15, 2006 so that means you have until April 15, 2009 to qualify for any refund.
If you had owed money for that year, chances are the IRS would have prepared a return for that year and assessed the tax against you already. Of course, since it has been four years since you filed, your address may have changed. In which case, the IRS may have already acted, but since it doesn’t have your current address, you just don’t know it.
Because dealing with the IRS can be intimidating, I suggest you try to engage a return preparer. If you’re entitled to a refund, the preparer may work with you in delaying his or her fees until you get your refund. Similarly, if you owe money, the preparer may be able to negotiate a better solution, which will justify the fees.
As far as the missing Form W-2, you or your preparer can call the IRS and get a copy of items reported to them by your employers and others. Preparers have a priority line and it has been my experience that I have been able to get transcripts of a client’s account in minutes after speaking to the IRS with the proper disclosure authorization.
If you owe money, you can expect to pay a 25-percent late filing penalty on any amounts owed. Add to that a half-percent penalty per month for paying late, up to a maximum of 22.5 percent. Also, figure in about 10-percent interest per year.
The 2005 return could cost you an additional 70 percent on top of any balance due. The other years would decrease at about the rate of 16 points.
It’s been my experience lately that if you come up with some sort of reasonable excuse and file all past-due returns, the IRS may not agree with it, but it may let you off for one year’s worth of penalties, usually the earliest year. The IRS was calling this a one-time goodwill gesture. Of course, if you have a very good reason, the IRS may let you off all penalties. Don’t forget to get caught up on any state returns due.
To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.