Unfiled Tax Returns

Rumor has it that the IRS assumes a taxpayer has died when he or she stops filing income tax returns. If the taxpayer has received income in subsequent years, and the paying entities have filed information returns like Forms 1096, 1099, W-2, and W-3 reporting payments to the taxpayer, though, the IRS will eventually realize that the taxpayer has not died, and is simply not filing income tax returns. In that case, IRC section 6020(b) authorizes the IRS to file tax returns on behalf of the taxpayer—allowing none of the deductions to which the taxpayer may be entitled—assess the tax, and begin collection action through bank account and wage levies.

It is important to be proactive with filing tax returns for at least a few reasons. First, the 3-year Statute of Limitations for tax return audits does not apply unless the taxpayer files the tax return. In other words, the IRS can conceivably assess tax against you 20 years from now if you don’t file a tax return this year. If you file the tax return, the IRS can audit you (with a few exceptions) no later than 3 years from now. Second, you cannot discharge income tax debts in Bankruptcy Court unless you file a tax return for that year. Third, the IRS will not establish an installment agreement to pay the tax unless all tax returns have been filed.

David A. Sprecace has more than 23 years of experience helping serial non-filers prepare and file their tax returns, establish an installment agreement with the IRS, and file an Offer in Compromise with the IRS. Call 303-454-8260 or email Dave at Dave@MyTaxLex.com to set up a phone consultation.