Unfiled Tax Returns

Posted by Siegel Tax Law on April 27, 2013

Unfiled Tax Returns

Approximately 10 million taxpayers do not file their federal tax returns each year. Typically, a failure to file can be cured easily if the taxpayer has professional representation and voluntarily addresses the problem. However, absent voluntary compliance and professional assistance, a taxpayer will face serious collection activities and even criminal prosecution for failure to file delinquent tax returns.

The IRS has considerable financial and technological resources to find and pursue non-filers. Continuous non-filers are at heightened risk of IRS action. While collection actions like liens and levies are most commonly used against non-filers, criminal prosecution is a real risk of not filing delinquent returns. Willful failure to file is a misdemeanor that carries a maximum one-year jail sentence.

How does the IRS assess a tax if no return is filed? It files a return for you.

Substitute Returns

Through its massive document storage system, the IRS can reach the many billions of interconnected documents to find the income you earned for any given tax year. For example, if you are a contractor, a 1099 form may have been filed.  If you are an employee, a W-2 may have been filed.  Once the IRS finds your income records, it files the return.  But the IRS will not include any exemptions or expenses you may be entitled to deduct and thus may overstate your actual tax liability.  Even after the IRS files for you, you can still file your own return and the IRS typically will adjust your account to reflect the correct figures.

Voluntary Compliance

The IRS permits taxpayers to file their delinquent tax returns under a voluntary compliance program. The most obvious benefit is that the taxpayer can avoid criminal prosecution if he can demonstrate the following:

  • Voluntarily informs the IRS of his failure to file for one or more years
  • Had income from only legal sources
  • Makes the disclosure prior to being informed that he is under criminal investigation
  • Files a correct tax return or cooperates with the IRS in ascertaining his correct tax liability
  • Makes full payment of the amount due, or if unable to do so, makes bona fide arrangements to pay

Once unfiled tax returns have been filed, the taxpayer must actually pay the tax due. This, of course, is the most difficult part of the process for many Americans who have suffered the devastating effect of the current economic downturn. The question is often whether one should pay the rent and purchase food, or pay big brother. The former ultimately wins out, and thus, the IRS begins its tax collection process.

When it comes to IRS help, you need a proven tax relief attorney by your side. Fortunately, Jeffrey R. Siegel, Esq., one of Kansas City’s go-to taxation attorneys, provides unmatched representation. Call now for tax resolution services.