Things to Know About Unfiled Tax Returns

Every person who earns money is required by law to file a tax return and has until April 15th of the following year to file the return. However, an extension can be requested, but if you owe money you be expected to pay the money prior to April 15th. Even if you know that there is no way you will pay the amount you owe, you are still better filing the return.

As far as the IRS is concerned no crime has been committed unless you have unfiled tax returns. Not paying the taxes that you owe will result in a number of other penalties, but not a threat of jail time. The IRS will be more agreeable to establishing payment options as long as you have already filed the tax return.

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Having an unfiled tax return is a potential crime

If you fail to file a tax return for a given year, you have potentially committed a crime in the eyes of the IRS and it is actually punishable by up to 1 year in prison for each year of unfiled taxes. However, they really only consider jail time in extreme circumstances, however, it is not necessarily a good idea to push your luck in order to find out how lenient the IRS will be in your case.

If you have unfiled tax returns for whatever reason, you are far better off filing all unfiled tax returns as quickly as possible will help to limit the damaging effects of IRS penalties. Having multiple unfiled tax returns is not a good idea either, if you only had one and tried making things right, it would be far easier.

The statute of Limitations on not filing a tax return

Even the IRS is not immune to requirements and limitations of laws. Just like any other criminal law, there is a statute of limitations to the law requiring the filing of a tax return. Any unfiled tax returns that exceed 6 years without any action from the IRS may no longer be subject to a criminal penalty of jail time. However, there is one big caveat to that last part; it does not mean you do not still owe the money. The IRS is still legally able to continue to pursue repayment of the tax bill for that return.

IRS can file a tax return in your absence

In extreme cases, the IRS has the authority to file a tax return for anyone that they know has not filed a return. Just so that you know, they maintain a list of those individuals and businesses that have not filed a tax return for the given tax year. When the IRS takes the step to file a return on your behalf you can be sure that it is actually a penalty with no deductions.

This is because when they file the return for you it will not have any credits, dependents or deductions that will help to reduce your tax burden and therefore you will more than likely owe much more than if you had filed it yourself. They will then contact you and demand your payment for any outstanding tax payment and the usual penalties and interest.

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IRS Levies and wage garnishments

While the threat of imprisonment for unfiled tax returns is highly unlikely, the other penalties definitely in play. The IRS has quite a bit of power when it comes to collecting back taxes and they have a reputation for being ruthless. They have many means in which they are able to go after people who have not filed tax returns or paid back taxes from previously filed returns.

The IRS has two very effective methods that it can use to collect the money that the government is owed; wage garnishment and bank levies. A wage garnishment can be extremely difficult to get reversed once it is in place until the IRS has collected the money it is owed. The IRS can legally garnish your wages up to 75% of after-tax income. Bank levies, on the other hand, they can seize your bank accounts, take your home and any other assets until the total tax bill with penalties is completely satisfied.

IRS Tax Penalty Abatement

While IRS does prefer to collect as much of the back taxes, penalties associated with unfiled tax returns, it does make exceptions since it knows that levies and garnishments can be extremely stressful on people. This is why it does offer a way for a person who has been hit with either one can file an IRS Penalty Abatement Form 843. This request is approved, will help to reduce the tax liability. Form 843 will be reviewed by the IRS and an agent with the IRS will evaluate all of the answers and then a final decision will be made and it will be communicated to you.

Call us for a free and confidential evaluation at 1-888-498-2937.