What Happens If You Don’t File Tax Returns for 10 Years or More?

There are numerous reason for having unfiled tax returns, It’s not hard to get behind on your taxes. Perhaps there was a death in the family or you suffered a serious illness. Perhaps you got divorced or lost your job. Whatever the reason, once you haven’t filed for several years, a taxpayer may become too frightened to file. However, not filing taxes for 10 years or more exposes you to steep failure to file penalties and a potential prison term.

There’s No Time Limit on the Collection of Unfiled Tax Returns

If you have unfiled tax returns, it may be tempting to believe that the IRS or state tax agency has forgotten about you. However, you may still be on the hook 10 or 20 years later. If you don’t file and owe taxes, the IRS has no time limit on collecting taxes, penalties, and interest for each year you did not file.

It’s only after you file your taxes that the IRS has a 10-year time limit to collect monies owed. The state tax agency has their own rule and many have more time to collect. For example, California has up to 20 years after you file to collect.

You Could be Charged with a Crime

The IRS recognizes several crimes related to evading the assessment and payment of taxes. Penalties can be as high as 5 years in prison and $250,000 in fines. However, the government has a time limit to file criminal charges against you. If the IRS wants to pursue tax evasion or related charges, it must do this within six years from the date the unfiled return was due. Non-filers who voluntarily file their missing returns are rarely charged.

Determine If the IRS Filed a Substitute for Return (SFR)

Having an unfiled tax return doesn’t mean the IRS won’t file one for you. The IRS may file a Substitution for Return (SFR) on your behalf. Don’t think of this as a complementary tax filing service. The IRS won’t give you any of the exemptions or deductions that rightfully belong to you. The IRS will also pile on “failure to file penalties”.

Once a Substitute for Return (SFR) is filed, you will be sent a notice to accept the tax liability as filed in this alternate return. If you don’t respond, the IRS will issue a notice of deficiency. At this time the tax is consider owed by you and the IRS can begin to enforce collection via tax levy and tax liens. To encourage payment, a tax levy can be placed on your wages (IRS wage garnishment) or bank accounts. A federal tax lien may also be placed against your real property.

If a Substitute for Return was filed, you don’t have to accept the outcome. An IRS Substitute for Return can be challenged. You can go back and refile those years and include any available deductions. Chances are you can decrease the tax owed, as well as the interest and penalties.

File Your Missing Unfiled Tax Returns

You may want to file your old unfiled tax returns before an IRS demand is made. There’s no time limit for submitting a previously unfiled return. However, if you’d like to claim your refund, you have up to three years from the due date of the return. It may be a good idea to speak with an experienced tax attorney before filing old returns. But, here’s some benefits of getting missing tax returns filed:

  • Protect your Social Security benefits: If you’re self-employed and don’t file, you won’t receive credits toward Social Security retirement or disability benefits. The IRS can levy your Social Security benefits to the tune of 15% per the Federal Payment Levy Program (FPLP).
  • Avoid issues obtaining loans: Loan may be denied or delayed if you cannot prove income by providing tax returns or reportable income.
  • Not having to worry about your unfiled tax returns: Once your tax issue is resolved, it will free up your time for more enjoyable pursuits.

Negotiate Your Tax Bill

If your tax assessment is too high, you may be able to negotiate a better deal. Penalties may represent 50 percent of what you owe to the IRS. Getting these removed can make a real difference.

If your debt is more than $10,000, you might consider a Partial Payment Installment Agreement (PPIC) where the IRS agrees to accept less than the total you owe. The IRS will only agree to a PPIC if it’s clear that the monthly payments you can make will not cover your total taxes due for many years.

An Offer in Compromise (OIC) is the ultimate IRS settlement agreement between a taxpayer and the IRS that settles a taxpayer’s tax liabilities for less than the full amount owed. In 2016, the IRS approved approximately 42% of all Offer in Compromise submissions. Find out if you qualify to settle your tax debt.



Still Have Questions About Not Filing Taxes?

Reach Out to an IRS Tax Attorney

The interest and penalties on back taxes can be substantial. If it’s likely that you owe money, it’s a good idea to talk with an experienced IRS Tax Attorney before filing your unfiled tax returns. Our IRS Tax Lawyers can negotiate with the IRS or state tax agency and set up a payment schedule you can reasonably meet. It may also be possible to reduce the fines and fees assessed against you.