I didn't file on time. Will they come find me?

June, 10 2014 by Carol Thompson, EA

Have no fear! The IRS generally won’t look for you unless you owe them money. If you don’t file for a refund within 3 years of the original due date of the return, or within 2 years of when the tax was paid, you won’t get the money. For example, if you did not file your 2010 tax return by April 15, 2014, you will not get a refund. Since it is now June 2014, that money is gone forever.

The problem is, if you did not file your return and you owe money, the IRS can look for you until you file as the “clock” does not start until you do file the return. They have the authority to prepare a “Substitute for Return,” or “SFR” with any informational documents that are sent to the IRS. Say you have a W-2 from an employer, a 1099-DIV showing some dividends from the stock shares your grandmother left you, and a 1099-MISC from Wicked Serious, the band you sat in with on a few Saturdays that year after the guitar player broke his finger. Even if you have withholding on the W-2, the IRS will charge you with Self-Employment tax on the band money.

“But wait!” you say. “I had expenses for the band!” The IRS knows you earned the money, but without a tax return, they have no idea you have expenses.

You may have been in the band several years ago – say 2010 – and you can’t file for a refund, but, the IRS can still bill you for the balance due because of the self-employment tax. How do you stop this? File the missing return.

All you need to do is file the tax return. Click on “Forms and Pubs.” They go back to the 1990’s, so you should be able to find your missing forms. You will find the tax tables, also. You may need to fill them out by hand (yes, a pen or pencil, not a computer). Many of the forms are pdf “form fills,” so you can fill them out online. Whichever method you use, be sure to keep a complete copy of the forms you send to the IRS.

File Schedule C, self-employment, for the band and list the expenses – instruments, music, travel to gigs, practice hall, recording studio for the CD that is wasting away on Amazon. Even the grunge costumes you wore – providing they were not clothes normally worn on the street. If you sang with KISS, you could even write off your makeup. But make sure you have receipts and proof of payment for the deductions.

What if you didn’t file your 2013? Are they coming for you? Not if you filed an extension. You have until October 15, 2014, to file. But don’t wait until October to add up your receipts! File as soon as you can to avoid additional penalties and interest. If you haven’t filed because you owe money, send in the return. It’s better to avoid a penalty of up to 25% of the tax liability for not filing on time. You can set up a payment plan online or even at the time you prepare the return.

Don’t wait for them to find you! Do the returns now and stop looking over your shoulder!