All is not lost if you weren’t able to file your 2014 Federal and Ohio income taxes by the April 15, 2015 deadline. As with many things in life, an ounce of prevention is worth a pound of cure when it comes to filing your taxes. Even if you didn’t file an extension, there will be no penalty assessed for filing late if you’re entitled to a refund. However, it’s important to remember that the IRS and State of Ohio have 3 year Statutes of Limitations on claims for Refunds. If you wait too long you could miss out on your federal and state tax refunds.
If you think you owe federal or state income taxes, you may be tempted to wait to file for fear that the IRS or the State of Ohio will pursue you for payment. While you will have to deal with these tax authorities eventually, it’s much better to file your returns as quickly as possible in light of the IRS 10 year Statute of Limitations on Collections. Once taxes are assessed, the IRS has only 10 years to collect – no matter what you owe, if it’s not paid by the last day of the 10th year after the tax was assessed against you, it becomes uncollectible – forever. But the clock doesn’t start ticking until you file your returns or the IRS estimates your tax liability by filing a substitute return for you. Once you file, if you cannot pay what you owe, you can arrange to be declared Currently Uncollectible or set up a reasonable installment plan. In the case of the IRS, it may be that the monthly payment you can afford won’t be enough to pay off your balance within the 10 year Collection Statute. That’s ok, the IRS is authorized to accept such a plan if you qualify.
Note, however that it’s different with the State of Ohio. Ohio has a very loose Statute of Limitations on Collections which essentially allows it to pursue you well beyond a 10 year period. It is therefore very important to file your Ohio return and make payment arrangements as soon as possible to avoid additional collection costs and a prolonged period of collection activity.
The bottom line about late income tax filings is that you need to file as soon as possible to get the statute of limitations running and contain future collection pain. There are always ways to deal with the tax liability once you’ve filed. But waiting to file out of fear of collections is not the way to deal with your IRS or Ohio Income tax problem.