Forgot to file your tax return or have unpaid taxes? It can happen for one of many reasons, such as being unable to afford tax services, failure to file penalties, simply forgetting about the tax deadline, or suffering from a serious illness that left you unable to file your income tax return.
It isn’t hard to avoid filing your tax return and then to ignore serious repercussions – that is, it’s easy until the IRS starts sending you warning notices telling you about your unfiled tax years or delinquent debts that you failed to pay.
IRS has the can take action against you for failure to file, which makes it very important to understand what the possible consequences could are for not filing your taxes.
The IRS can file your federal tax return on your behalf
The IRS might file an SFR (Substitute for Return) on your behalf if they see a failure to file for a particular tax year or years. They do not file an SFR as a courtesy to help disburse unclaimed refunds and will not include any exemptions or deductions for you. So the filed SFRs can show that a taxpayer owes a tax to the IRS.
The IRS will also send out a collection notice stating that an SFR was filed and informing you if there is a tax debt and interest rate linked with the SFR.
The IRS does not have a time limit to collect from you
There is no deadline for the IRS taking collection action. After they assess a balance against you, they can instantly levy your bank accounts, garnish your wages, and place liens on your physical assets.
The IRS hasn’t forgotten about your past due tax years just because you did. It could even mean that they can hold you responsible for your back tax balance for as many as ten years from the day that they assessed your balance.
Failure to file your tax return could be a crime
In some cases, failing to file your tax return might mean getting into serious criminal trouble. The IRS could consider it a crime, assuming that you are evading the tax debt that they assessed on your behalf. Actions for not filing your tax return could be a stint in jail or fines as much as $250,000.
Why it is important to file your missing tax return
If you want to avoid the IRS taking collection action against you, filing all outstanding tax returns is essential. Even though there isn’t a time limit for filing any past tax years, the IRS puts a limit on getting your refund for previous tax returns. The IRS also lets you collect a tax refund for only three years after the due date of your tax return.
Filing tax returns might not be the most exciting activity, and some might even dread the filing season as it approaches.
Regardless of how you feel about it, filing your taxes due is a requirement to stay compliant with the IRS and out of collections.
If you have unfiled tax for many years, it can be helpful to talk with a tax resolution company or tax attorney in order to resolve any outstanding tax balance you might have for the unfiled tax years or any additional debt that was assessed when the IRS filed an SFR for you.