Always File a Tax Return

Why do I recommend to always file a tax return even if you are not required to file?

• Start the statute of limitations running for audit
• For collections regarding issues in a particular year's return
• Avoid identity theft

1. There is no statute of limitations on a late/no filed return. You never know what will trigger and audit. The IRS can go back to any unfiled year and assess a tax deficiency along with penalties. Will you have the documentation to support your claim and get penalties removed?

Example: You receive 1099s but you have deductions that create a net loss and bring you under the filing threshold. The IRS receives the 1099s and they're looking for those 1099s to show on a tax return. They don't know there's a loss, unless you file a return showing the deductions that create a loss. Alternatively, the IRS can generate a substitute return that may produce a higher tax bill with penalties and interest. 

2. Once you have filed your return the IRS has 3 years to notify you of additional taxes. Filing closes the statute of limitations. 

3. Identity theft is high. They want your refundable credits. IRS may not be aware of identity theft unless you file your return. 

If you have been a victim of identity theft or have been alerted that your social security number has been found on the dark web, I recommend you request an Identity Protection Pin from the IRS. Click here for details on how to apply. 

A warning: once you have a pin, you must use your pin every year on your federal tax return or your return will be denied.