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How far back can the IRS go for unfiled Taxes?

How far back can the IRS go for unfiled Taxes?

Did you know that overtly avoiding filing your taxes is considered a federal crime that can attract high fines and a jail term of up to 5 years? Under federal laws, willfully failing to file a tax return is considered a misdeameanor, while overtly avoiding the filing and payment of your taxes is considered a felony.

Your income taxes are documents that must be filed with both the federal revenue service and your local tax authorities annually. The failure to do so attracts a “failure to file” penalty, which is calculated at 5% of the unpaid tax amount that you owe to the government. This amount could, however, rise to up to 25%, and it kicks into action as soon as the deadline for filing your tax return has passed.

You must note that the “failure to file” penalty is different from the “failure to pay” penalty. The major difference is that while the failure to file penalty is calculated as 5% of the outstanding tax due, the failure to pay is calculated as one or one and a half percent of the outstanding taxes owed. The penalties accrued can, however, increase to up to 25% as well.

You may also be wondering if these criminal charges have a time limit. Is there a time when the IRS can no longer hold you legally over unfiled taxes? How far back can the IRS go for unfiled taxes? We will answer these questions and more in the paragraphs below by giving you sufficient information.

How far back does the IRS check for unfiled Taxes?

Legally, the IRS reserves the power to dig up a tax deficiency in any year that you ahve failed to file your tax returns and to enforce the penalties that come along with that deficiency. However, in practice, they hardly ever go past a six year mark to enforce penalties on a non-filing tax offense.

Additionally, the IRS has prioritized the pursuit of non-filers by engaging its Substitute for Return (SFR) program which files tax returns for taxpayers who refuse to be compliant wityh tax filing laws. The SFR’s actions are usually carried out within three years after the date of the tax return is due.

This is, however, not an excuse to continue defaulting on your tax filing. When you purposely evade filing your taxes for 10 years or more, you are exposed to steep penalties and even a potential prison term.


How many years can you file back taxes?

Filing your back taxes is really important regardless of whether you can pay in full or not. A few reasons why you should file your back taxes now include:

  1. To protect your social security benefits
  2. To avoid penalties and interests
  3. To claim refunds
  4. To avoid obstacles with obtaining loans.

However, there are cases where you will be advised not to file your back taxes. If you have one or two years of taxes that you haven’t filed, you definitely should get on filing them first before you get back on track with your current unfiled taxes.

However, if for some reason, life happenes and you have up to eight, nine, or ten years of unfiled returns, then you should not file them just yet, especially without the help of a tax professional.

The IRS had a 6 year requirement for you to be considered complaint with filing your taxes. So, if you have seven years or more of missing returns that you need to file, the IRS may not require you to file it. By filing them, you may be drawing the attention  of the IRS to money they were not previously considering.

If you are at this point, you should be aware that there are advantages and disadvantages to every decision that you make. A huge disadvantage that you may encounter is that if you are self-employed, making the decision not to file the back taxes alienates you from social security benefits. The advantage is that you can walk away from a huge tax liability.

If you are looking at more than 6 years of unfiled tax returns and you’re looking at getting these filed, getting advice from a qualified tax professional to see if filing all of those tax returns is the smartest thing to do is in your best interest.

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Internet subscribers, users, and online readers are advised not to act upon this information without seeking the service of a professional accountant. Any U.S. federal tax advice contained in this website is not intended to be used for the purpose of avoiding penalties, of any kind, under U.S. federal tax laws.