Do Unfiled Taxes Scare You: 5 Essential Steps You Should Take

Do Unfiled Taxes Scare You: 5 Essential Steps You Should Take

How to Resolve Your Unfiled Tax Filing Issues

Each year, U.S. Taxpayers across the globe are required to file tax returns with the Internal Revenue Service. Unlike most other countries, the United States taxes individuals on their worldwide income, which means even if the income is earned overseas and even if the taxpayer lives overseas, if the taxpayer is a U.S. person they are required to report their worldwide income. When a taxpayer learns that they are out of compliance it can be overwhelming and scary– but oftentimes the issue can be fixed without significant fines and penalties part is important to try not to fall victim to unscrupulous tax attorneys and other professionals who will immediately want you to believe you may be subject to willfulness penalties become a fraud or even possibly a criminal violation having happened while these things may happen it is rare. Let’s look at five (5) essential steps to take when you have unfiled taxes.

How Many Years of Unfiled Taxes?

When a person realizes that they have unfiled taxes, the first thing they should do is try to assess the damage to put together an effective strategy to resolve the issue. One of the first steps to take is to determine how many years of unfiled toxins there are for example is it only a year or two, or several years of unfiled taxes? This will impact which steps to take when determining how to resolve the issue.

What Types of Unfiled Income?

The next step the taxpayers should take is to determine what types of income are unfilled. For example, is the taxpayer’s only source of wages from employment — or did the taxpayer earn a significant amount of investment income in the United States — and abroad and therefore have many different buckets of income that were not reported on their tax return? This will also help determine what options are available and able to get into compliance.

Did You Already Have U.S. Taxes Withheld?

Oftentimes, the failure to file taxes is due to a misunderstanding. For example, did the taxpayer primarily have employment wages and was receiving a W-2, so his taxes are already being withheld and he just didn’t know that he was required to file a tax return? In many countries, a taxpayer does not file a return even though taxes are withheld, so this is not an uncommon situation.

Did You Pay Foreign Tax Credits?

Taxpayers who have income generated from overseas may have already paid taxes in a foreign country. Even though the taxpayer paid taxes in a foreign country, they are still required to file taxes in the United States if they meet the threshold. Nevertheless, even though the taxpayer will have not filed taxes, by the time the situation is resolved they may not have any tax liability in the United States.

Do You Have Unfiled Foreign Accounts and Assets?

Finally, if the taxpayer also has foreign accounts, assets, or investments, there may be additional requirements the taxpayer has to comply. Specifically, the taxpayer may have to file various international information reporting forms, such as the FBAR and Form 8938. Taxpayers shouldn’t be too overly concerned, because the IRS has developed various amnesty programs to safely assist them with getting into compliance. 

Late Filing Penalties May be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs Prior Year Non-Compliance

Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

Contact our firm today for assistance.