Many taxpayers I have seen over the years were under the assumption that if they didn’t owe the IRS money, or, better yet, if the IRS owed them a refund, there was no rush to file a tax return. When they eventually filed, if ever, they thought they could still take advantage of all the deductions, credits, and exclusions. But that’s not the case; not filing can cost more than just the refund.
Last year, I was contacted by an American I’ll call Eric, who had been living and working in the Netherlands for about 3 years. The first year was hectic for Eric as he adjusted to a new job, in a new country, and he failed to file a tax return in the U.S. When he finally filed his U.S. tax return last year with the help of a local tax preparer, he also filed his previous years’ returns after receiving a notice from the IRS that they had filed a substitute for return for him.