Myth. 1: Filing late or amended tax returns might trigger an IRS audit.
Truth 1: Filing prior years do not trigger audits automatically. Audits are conducted at random. Most likely, given the current operational capacity of the IRS; they would be just happy to receive the returns.
Myth 2: Failure to file late tax returns doesn’t result in bad consequences.
Truth 2: Failure in filing tax returns can result in two negative consequences. First, the IRS may file a return for you without claiming deductions and credits that you may be eligible for. Second, since failure to file a return in a year in which you owe the IRS money is a crime, the IRS might recommend criminal prosecution. The IRS generally doesn’t recommend criminal prosecution for taxpayers who file a return before they are notified that they are under criminal investigation.
Myth 3: I haven’t filed a tax return in several years cause I don’t owe, they owe me money.
Truth 3: The statute of limitations for claiming a tax refund is three years, counting from the due date of the tax return in which you should have claimed it, or two years from the date you paid any taxes due. If you don’t claim your refund by the deadline, you have in effect donated it to the IRS.
Myth 4: If I owe taxes , they are going to want the money now.
Truth 4: If you owe no more than $50,000, the IRS is likely to allow you to pay in installments. If you owe more than that, the IRS will closely examine your finances before allowing you to pay in installments. Penalties and interest will continue to accumulate during the installment period, but the IRS won’t take collection action as long as you keep up with your payments.