The IRS has an unlimited amount of time to assess tax for a period where no return was filed. Technically, you should keep your records forever for any tax year where you did not file a return, but in practice the IRS doesn’t commonly go back more than six years when enforcing filing requirements. However, it is possible for the IRS to require you to file more than six years of delinquent returns.
Assessment Statutes of Limitations
The general statute of limitations on tax assessment is three years. If you filed a return, you should keep your records at least this long in case you are selected for an IRS tax audit.
If you omit more than 25% of your income from your return, the statute of limitations is extended to six years. Six years is also the period given to audit FBAR compliance.
For unfiled returns or cases involving tax fraud, the assessment period is unlimited. That’s one reason it may be beneficial to file a tax return even if you don’t have a filing requirement.
Filing Unfiled Returns
Practically, the IRS rarely requires taxpayers to go back more than six years and file a return. Filing six years of delinquent tax returns and negotiating a payment arrangement will generally satisfy the IRS when you have many years of unfiled returns. In certain cases the IRS does have the ability to require the taxpayers to go back more than six years when filing delinquent returns.
The IRS may also file your delinquent returns for you. This is known as the Substitute for Return (SFR). The SFR is pieced together using information the IRS has about your income, mainly from informational forms such as W-2s and 1099s.
However, the SFR generally won’t include all of your credits or deductions, leading to a higher tax liability. The SFR counts as a tax assessment that gives the IRS the right to start collection activity.
Keep in mind that if you are owed a tax refund, you won’t be permitted to collect it if it’s been more than three years since the return filing deadline.
Get Help With Unfiled Returns
Filing delinquent returns is a critical step in the tax resolution process because you can figure out exactly what you owe. Furthermore, the IRS won’t even consider some tax repayment options if you have unfiled returns.
Once you’ve got your delinquent returns filed, you can work on an installment agreement, Offer in Compromise, or another tax settlement strategy. Contact a tax attorney for assistance with tax problems caused by unfiled returns.
The Gartzman Law Firm can help you with delinquent tax returns and other IRS tax problems. Use our contact form to request a consultation with an Atlanta tax resolution attorney.