The IRS can assess tax for any period in which no returns were filed. Although technically, it is advisable to keep all tax records for any year in which you have not filed a return. However, the IRS rarely goes back further than six years when enforcing filing obligations. The IRS may require that you file delinquent returns for more than six years. So how long should you worry about unfiled tax returns?
Assessment Statutes of Limitations
The three-year statute of limitations for tax assessment is generally three years. In case of an IRS tax audit, it is a good idea to keep all records you have filed.
The statute of limitations for income omissions exceeding 25% is extended to six year. Auditing compliance with FBARs is allowed for six years.
The assessment period for unfiled returns and cases involving tax fraud is unlimited. This is one reason why it might be advantageous to file tax returns even if there is no filing requirement.
The IRS doesn’t require taxpayers to file returns for more than six years. If you have many years of unfiled tax returns, the IRS will usually accept six years worth of delinquent returns. You can negotiate a payment agreement or file a return after that. The IRS can require taxpayers to file delinquent returns for more than six years in certain cases.
You may also have your IRS file your late returns. This is called the Substitute for Report (SFR). The IRS has information about your income that is used to create the SFR. This information is mainly gathered from informational forms like W-2s or 1099s.
The SFR will not include all your deductions or credits, which can lead to higher tax liabilities. The SFR is a tax assessment, which gives the IRS the authority to begin collection activities.
Remember that you can’t collect a tax refund if it has been more than three year since the deadline for filing returns.
Assistance with unfiled returns
You can determine exactly how much you owe by filing delinquent returns. The IRS will not consider certain tax repayment options, if you haven’t filed returns.
After you have filed your delinquent tax returns, you can start working on an installment agreement or Offer in Compromise. For assistance in tax problems caused due to unfiled tax returns, contact a tax attorney.
The Tenina Law Firm is able to assist you with IRS tax problems and delinquent returns. To request a consultation with a tax resolution lawyer, please use our contact form.