Unfiled Tax Returns

What to Know about Unfiled Tax Returns

Whether you recently discovered an income-related tax document that you forgot to report on in a prior years tax return, or you failed to file last year’s taxes altogether, unfiled tax returns can land you in a whole lot of trouble with the IRS. No matter why your taxes went unfiled, the most important thing you can do is to act quickly. 

You may think to yourself, “The IRS has to track millions of taxpayers each year; what are the chances they’ll catch my mistake?” Think again. There’s a fairly significant chance that the IRS will catch your error. Along with every tax document that you’re sent each year, there’s a corresponding document sent to the IRS. The IRS has a record of every taxpayer who is required to file taxes each year. They can and will pursue legal action against those who don’t. 

If you fail to file taxes, you’ll be charged with a penalty for filing taxes late, as well as interest and additional charges. It can lead to garnishment of your future tax refunds, liens against your assets, and the levy of your property. These aren’t just serious inconveniences, but they can also derail your finances and your life. 

I Have Unfiled Tax Returns but Haven’t Heard From the IRS—Am I Ok? 

If you know you have unfiled tax returns with the IRS, but haven’t been contacted in regards to them, you’re not off the hook. The IRS interacts with millions of taxpayers each and every year. They may have a long list of other people with unfiled taxes to reach out to ahead of you, but they will get to your taxes one day. And when that day does come, they will take swift and drastic action. 

How Long Does the IRS Have to Contact Me for Unfiled Tax Returns? 

Here’s the thing: if the IRS has not yet pursued you for unfiled tax returns, they technically have forever to do so. The IRS assessment statute of limitations, also known as ASED, says that the IRS has two years from the time that you file your taxes to charge you additional taxes on that return. But that statute only begins to run once you file your tax return. As long as your taxes remain unfiled, there is no statute of limitations on them. 

Because of this, it’s in your best interest to act before they do. Remember, the longer you stay in debt with the IRS, the more interest, penalties, and fees you will incur. That means that your debt will continue to grow over time. The sooner you pay off your debt, the smaller your owed amount will be. Additionally, the IRS favors taxpayers who are proactive about their tax debt. If you take the initiative to contact the IRS about unfiled taxes that they have not pursued, you may be in a better position for a Partial Payment Installment Agreement or an Offer in Compromise, or any other tax relief program available via the IRS Fresh Start Program.