Unfiled Tax Returns

COVID-19 UPDATE - The 2019 income tax return filing due date for Form 1040 tax returns for the US and Michigan are due by July 15, 2020.  This is an automatic filing extension for unfiled tax returns that were not filed by April 15, 2020.  If you have concerns about unfiled prior tax year returns or back taxes owed to the IRS, contact tax attorney Andrew Steiger for assistance.


An extension to file your return is NOT an extension to pay any income tax debt.  You will be assessed penalties if you pay a balance after July 15, 2020.

A taxpayer's unfiled tax returns may go unnoticed by the IRS for a period of time, maybe a few years or more, but generally not forever.  Taxpayers with unfiled tax returns can face potential criminal penalties if the failure to file returns was fraudulent or due to tax evasion.  There is no statute of limitations for the IRS to assess tax and enforce the tax laws for unfiled tax returns.  Penalties and interest continue to accumulate to the extent allowed by law for unfiled tax returns with a tax balance due. 


Further, the IRS does not have to wait for a taxpayer to file unfiled tax returns.  If taxpayers do not file the tax returns themselves, the IRS has the power to file substitute tax returns on the taxpayer's behalf.  The IRS has a policy that it will generally require unfiled returns to be filed for the most recent six years, but can make exceptions if fraud or evasion is suspected, including large unpaid tax debts.  As you can imagine, the IRS does not make it a priority to minimize the tax due.

Background for Filing Tax Returns and Tax Compliance for Back Taxes

The US tax system is voluntary and gives taxpayers the right to prepare and file their own tax returns based on their own interpretation of applicable tax laws, regulations and published guidance.  This voluntary system is beneficial because taxpayers are free to arrange their affairs to minimize taxes within the boundaries of the law.  The downside of the government not preparing the tax return on behalf of taxpayers is that some taxpayers will forget or refuse to file returns. 


To combat these failures, the IRS collects information from a variety of sources including employers, third parties, contractors, and financial institutions to verify taxpayer compliance and reporting.  Taxpayers may be able to avoid IRS enforcement of unfiled returns and this wide net for a period of time, but the IRS is very good at using its information advantage to catch up with taxpayers. 

n addition, federal income tax returns are required for important transactions including mortgage applications.

What Happens If An Unfiled Tax Return Results In a Refund?


For taxpayers who are owed a refund, failing to file a tax return will result in the loss of the tax refund forever.  Taxpayers cannot claim tax refunds after the refund statute of limitations has expired.  Taxpayers generally have only three years after the return due date to claim a refund by filing a return or amending a previously filed return.  After that, the US Treasury will keep the money even if you file a late tax return.  States often provide an additional year (four years) to allow for a refund, but state law should be reviewed carefully to determine the window for refund claims.


If you have filed a tax return late and expect a refund, but have not received it, contact Michigan tax attorney Andrew Steiger at Steiger Tax Law for a free consultation to discuss your options.


What Happens If I Owe Tax And Have Not Filed My Tax Returns?

Taxpayers should generally file prior year returns for years when tax is owed, even if past due, to minimize penalties and interest.  There are exceptions to this general rule depending on the facts and circumstances.  Even if you cannot currently pay the amount shown as due with a tax return, you may be able to minimize the failure to file penalty and related interest by filing a return on time or soon after the filing deadline.


Penalties and interest can accumulate quickly and may eventually exceed the original tax due for older return years.  Penalty assessments may cease for older tax years, but interest on penalties and the original tax balance due will continue to compound and grow at an accelerated rate.  At this point, you likely will need to consider tax debt resolution options like an Offer In Compromise or Currently Not Collectible account status to reduce or defer payment of your overall tax debt.  An installment agreement may also be a tax resolution option to avoid tax liens and levies, but may result in full payment of the tax debt.


Taxpayers facing multiple years of unfiled returns may be tempted to avoid filing returns altogether or file only after the IRS catches up to them with a delinquent tax notice or assessment.  This is generally a bad strategy because the IRS reviews a taxpayer's attempt to voluntarily comply with the tax laws as one of many factors when determining whether to accept an Offer In Compromise or approve Not Currently Collectible account status. 


Will Unfiled Tax Returns Lead to Criminal Prosecution and Jail Time?

Failure to file tax returns can also rise to the level of a tax crime with criminal penalties including additional fines and jail time.  Defending a criminal prosecution is generally an extremely expensive undertaking due to the seriousness of the charges and aggressive IRS prosecution.  Criminal prosecution is rare and usually reserved for exceptional cases of tax evasion or fraud.  The IRS may use high profile taxpayers to attract the public's attention to the possibility of jail time and instill fear in non-compliant taxpayers.  While this tactic is helpful in encouraging voluntary compliance with the tax laws, the IRS also prosecutes average citizens who ignore the tax laws and their filing obligations.  Given the opportunities to reduce, eliminate, or defer payment, taxpayers should strongly consider getting back into compliance and remaining compliant going forward.  The IRS may not accept a taxpayer's claim that they are unable to pay taxes as a defense to failing to file a tax return.


Contact Michigan Tax Attorney Andrew Steiger for Unfiled Tax Returns Help

If you have unfiled tax returns and are interested in resolving possible related tax debts, contact Michigan tax attorney Andrew Steiger at Steiger Tax Law for a free consultation.  He can help taxpayers with IRS debts on a nationwide basis, including filing returns and developing a tax relief plan.  Do not ignore unfiled tax returns that may result in large tax assessments that the IRS will not reduce.

Free Consultation

Contact Michigan Tax Attorney Andrew Steiger for free consultation to determine if he can help solve your tax or other legal problem.  Free consultation does not establish attorney-client relationship.  Information is confidential and protected by attorney-client privilege.

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