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What Happens If You Don't File Taxes for 10 Years or More?

Senior couple discusses failure to file taxes.

You may have thought you didn't have to file taxes because you didn't make enough money or you were living overseas. However, most people who earn income over a certain amount still have to file their taxes. If it has been years since you filed taxes or paid taxes, you may still be liable for back taxes. You may also be able to claim money for refunds for prior years.

Failure to File Taxes?

If you fail to file your tax returns on time you may be facing additional penalties and interest from the date your taxes were due. Failure to file or failure to pay tax could also be a crime. The IRS recognizes several crimes related to evading the assessment and payment of taxes.

Under the Internal Revenue Code § 7201, any willful attempt to evade taxes can be punished by up to 5 years in prison and $250,000 in fines.

For most tax evasion violations, the government has a time limit to file criminal charges against you. If the IRS wants to pursue tax evasion or related charges, it must do so within six years, generally running from the date the unfiled return was due.

People may get behind on their taxes unintentionally. Perhaps there was a death in the family, or you suffered a serious illness. Whatever the reason, once you haven't filed for several years, it can be tempting to continue letting it go. However, not filing taxes for 10 years or more exposes you to steep penalties and a potential prison term.

There's No Time Limit on the Collection of Taxes

If you have old, unfiled tax returns, it may be tempting to believe that the IRS or state tax agency has forgotten about you. However, you may still be on the hook 10 or 20 years later.

There is generally a 10-year time limit on collecting taxes, penalties, and interest for each year you did not file. However, if you do not file taxes, the period of limitations on collections does not begin to run until the IRS makes a deficiency assessment.

State tax agencies have their own rule and many have more time to collect. For example, California can collect state taxes up to 20 years after the assessment date.

Determine If the IRS Filed a Substitute Return

Just because you didn't file your return doesn't mean the IRS won't file one for you. The IRS may file a Substitution for Return or SFR on your behalf. Don't think of this as a complementary tax filing service. The substituted return may leave off the exemptions or deductions that rightfully belong to you.

Once an SFR is filed, you will be sent a notice to accept the tax liability as filed in this alternate return. If you don't respond, the IRS will issue a notice of deficiency. At this point, the tax is considered owed by you and the IRS can begin the collection process. To encourage payment, a levy can be placed on your wages or bank accounts. A federal tax lien may also be placed against your home and real estate.

If an SFR was filed, you don't have to accept the outcome. You can go back and refile those years and include any available deductions. You may be able to decrease the tax owed and reduce any interest and penalties.

File Your Missing Returns

You may want to file your old returns before a demand is made. There's no time limit for submitting a previously unfiled return. However, if you'd like to claim your refund, you have up to 3 years from the due date of the return. It may be a good idea to speak with an experienced tax attorney or CPA before amending or filing old returns. Here are some benefits of getting missing tax returns filed:

  • Protect your Social Security benefits: If you're self-employed and don't file, you won't receive credits toward Social Security retirement or disability benefits.
  • Avoid issues obtaining loans: Loans may be denied or delayed if you cannot prove income by providing tax returns or reportable income.
  • Not having to worry about your unfiled taxes: Once your tax issue is resolved, it will free up your time for more enjoyable pursuits.

Negotiate Your Tax Bill

If your tax assessment is too high, you may be able to negotiate a better deal. Penalties may represent 25% of what you owe to the IRS. Getting these removed can make a real difference. File Form 843 to request an abatement of taxes, interest, penalties, fees, and additions to tax.

You might consider a Partial Payment Installment Agreement (PPIC) where the IRS agrees to accept less than the total you owe. The IRS will only agree to a PPIC if it's clear that the monthly payments you can make will not cover your total taxes due for many years.

Another option to reduce your total tax liability is an offer in compromise (OIC). If the IRS accepts an OIC, it acts as an agreement between a taxpayer and the IRS to settle a taxpayer's tax liabilities for less than the full amount owed. If you can fully pay your liability through an installment agreement or other means, you won't generally qualify for an OIC.

Questions About Not Filing Taxes? Reach Out to an Attorney

The interest and penalties on back taxes can be substantial. If it's likely that you owe money, it's a good idea to talk with an experienced tax attorney before filing your past due returns. An attorney can negotiate with the IRS or state tax agency and set up a payment schedule you can reasonably meet. It may also be possible to reduce the fines and fees assessed against you.

You Don’t Have To Solve This on Your Own – Get a Lawyer’s Help

Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.

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Next Steps

Contact a qualified tax attorney to help you navigate your federal and/or state tax issues.

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