Dear Dr. Per Cap:
I haven’t filed taxes in three years. I dread this time of year because I always worry the IRS is going to come knock down my door. What can I do to get my taxes squared away?
Signed, Dreading Taxes
Dear Dreading
You’ve taken the first step by acknowledging your situation and the need to take action – that’s good! You’re also not alone because every year more than a few million people don’t file taxes either. Some don’t file for political reasons, some forget, and some just don’t care.
Since you didn’t say why you haven’t filed I’m curious to know the reason. Did a family emergency come up that distracted you? Are you missing W2’s or other tax statements? Whatever the issue the longer you wait the worse it looks to the Internal Revenue Service. In fact willfully failing to file a tax return is a federal crime. Although your chances of being prosecuted are next to nil so don’t worry about guys in dark suits and sunglasses knocking on your door – unless it’s Halloween and your neighbor is a Blues Brothers fan!
Also depending on your income level it’s possible you aren’t even required to file taxes. For tax year 2019 a single person under age 65 who earned less than $12,200 is not required to file a federal return. For a person under 65 claiming head of household the minimum income jumps to $18,350. And for a married couple both under 65 and filing jointly the minimum income is $24,400.
However, even people who have income below these thresholds should still file because they might be entitled to a refund from the Earned Income Tax Credit or another refundable tax credit.
Another possibility is that you really don’t owe that much back tax. Especially considering more than 76 million or roughly 44% of Americans didn’t owe any federal income tax in tax year 2018.
So here’s what you need to do. In addition to filling a 2019 tax return before April 15th, 2020; you should also file returns for the three previous years you mentioned. Check out the IRS website to see if you qualify for free online E-file. Or visit a Volunteer Income Tax Assistance (VITA) site. Many Native communities offer free VITA to eligible filers through tribal colleges, community development financial institutions (CDFI’s), and other tribal programs. You might also want to seek guidance from the Taxpayer Advocate Service or TAS. Every state has at least one taxpayer advocate who works independently from the IRS and can offer assistance with difficult tax situations. Call 1-877-777-4778 to see if you qualify for TAS.
And by all means please get the ball rolling soon. If you owe back taxes the IRS can put you on a payment plan to get you caught up. But the longer you wait the more penalties and interest will keep adding up.
Ask Dr. Per Cap is a program funded by First Nations Development Institute with assistance from the FINRA Investor Education Foundation. For more information, visit www.firstnations.org. To send a question to Dr. Per Cap, email askdrpercap@firstnations.org.