Didn't file 2006 tax return. How to handle when filing this yr? Experienced tax preparer's help appreciated!

Question

I didn't turn in taxes for 2006. Due to an error my husband made claiming his dependents, we owed $700. Had we filed seperate returns, I would have got $600 and husband would have owed $1400. I know it was wrong to do, but we didn't have the money so we just never sent in our taxes.

We definitely need to file our taxes this year! In Oct, had a baby so we'll have child tax credit. Husband corrected dependency error from last yr. I quit my job in Feb when pregnant due to medical problems, so our income this year is approx $25,000 less than it was last year.

How should we go about filing our tax returns? Do we send in two seperate filings for 2006 and 2007? Will they automatically deduct what we owe from '06 out of our '07 taxes? Or will we get our taxes back from '07 and have to send in '06s? Would it be better for us to file married seperate or together as I had taxes due back last year? How will last year change how we need to file this year?

Thanks for any help!

Answer 1

I recommend you file a joint return with your husband for 2006. You will have to mail it in. Your husband underwithheld his taxes on his pay, that is not a big deal in itself. If you do not have the money, file it anyway as soon as possible.

File your joint return for 2007. Do not file separate returns because you will lose your Earned Income Credit, for which you qualify.

The IRS may hold up your 2007 refund because of 2006. So, file the 2006 immediately, then wait a month and file your 2007 electronically. The IRS may take out the money you owe from your 2007 return, which probably has a refund.

Answer 2

You need to file the two years separately. Depending on when you file the 2006 return, they might or might not deduct the amount from then automatically from the 2007 refund. If it hasn't caught up yet, they might not, but if they don't, interest and penalties for late payment will continue to mount, so you are better off to get the 2006 money paid as soon as possible. Even if you can't pay it all, get it filed, since there are additional penalties for non-filing accumulating every month until you do.


It is almost always better overall to file a joint return. If you file separately you'll pay more total between you than if you file a joint return.

Answer 3

2006 return is separate from 2007 return. You must file your 2006 return. If you owe any tax you will pay interest and penalty. You can't now file 2006 return online, you must send the paper copy.

About filing joint return or separate returns.
Many credits and deductions are not available if you file Married Filing Separately. So normally you should file as Married Filing Jointly, unless there is a compelling reason to file otherwise.

This is from IRS publication 17: Your Federal Income Tax.
Tip. If you and your spouse each have income, you may want to figure your tax both on a joint return and on separate returns (using the filing status of married filing separately). Choose the method that gives the two of you the lower combined tax.

Answer 4

You should file a paper joint return. If you file separately your husband would get a bill for $1,400 plus about 40% in penalty and interest and you would get your refund. If you file jointly, you will receive a joint bill for $700 plus 40% penalty and interest on the smaller amount.

If you expect a refund on your 2007 return, you should file it as soon as possible (but wait until your 2006 return is in the pipeline for a few weeks.) This is because IRS will apply your refund to what you owe as of the date the return is processed or April 15, whichever is earlier. You will save on late payment penalty and interest if you file early. Request a paper check. If the two returns cross in the mail and you get your refund, do not cash the check but return it to IRS and it will get applied to what you owe for 2006 as of the date of the check.