You have three years (from the date the tax was due) to claim your refund. This means you have until July 15, 2020 to get refunds for 2016 tax returns. Therefore, 2016 tax returns need to be prepared and filed in the next month to secure a refund.
The IRS is looking for missing tax returns. The IRS uses Notice CP516 to request a missing tax return. If you receive this letter from the IRS, it means that the IRS knows of your missing return and it needs to be prepared and filed as soon as possible.
If you do not file missing returns, you are subject to a Failure to File penalty. This penalty is 5% per month, for 5 months-Up to 25% of the tax due. Even if you cannot afford to pay the tax right away, file the tax return as soon as possible to stop the penalties from adding up.
Substitute for Return
If you fail to file a tax return, the IRS will prepare a return for you. This is called a Substitute for Return. The Substitute for Return is almost always bad for you as it means the highest tax rates, and no deductions or exemptions. In other words, a Substitute for Return generally results in a large, unexpected tax liability.
If you have missing or late tax returns, the best thing you can do is get them prepared and filed as soon as possible.
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Massey and Company is a boutique CPA firm in located in Atlanta, Georgia serving the needs of small businesses and their owners.