What If I Have Unfiled Income Tax Returns?The specifics of your situation, as well as how many tax returns are missing will determine what your next step should be when you have unfiled tax returns. Those taxpayers who have not willfully refused to file a tax return and have not committed fraud should simply prepare and file their missing returns as soon as possible. Conversely, those taxpayers who have acted willfully to avoid filing tax returns or who have committed fraud should consult an attorney immediately.
The IRS takes "Nonfilers" very seriously, in some cases assessing Civil and even Criminal Penalties to those individuals that refuse to file or fraudulently file a tax return. It is a Federal misdemeanor to willfully fail to file a tax return, with punishment which may include imprisonment for up to one year and a fine of up to $25,000 (up to $100,000 for a corporation). However, most taxpayers with delinquent IRS tax returns are assessed smaller civil penalties for failure to file and failure to pay up to 25% of the tax due, once the original return is filed.
What If I Have Several Missing Income Tax Returns?There is a debate amongst tax professionals when several tax returns are unfiled. Most suggest filing at least the last six years' tax returns, if true and correct returns can be prepared and filed. However, Fresh Start Tax Relief suggests consulting an attorney and then a tax professional, in that order.
If I File My Missing Tax Returns With a Refund Due, Will I Get It?In most cases, the IRS will not issue a refund if you file a tax return 3 or more years past the original due date.
Can The IRS File Returns For Me?Yes. IRC Section 6020 (b) allows the IRS to create a tax return if you don't file an original, called a Substitute for Return. When the IRS creates a Substitute for Return on your behalf, the tax outcome is usually not in your favor. In most cases, you will owe more tax than if you had prepared and submitted an original return with your correct deductions.
However, even though the IRS has prepared and filed a return on your behalf, you may still file your own original tax return to be processed and take the place of the IRS Substitute for Return.