If you haven’t filed taxes for years and you’re wondering how far back the IRS can go, it’s time to take action. The IRS has 10 years to collect payments on assessed taxes, but when a return isn’t filed at all, the agency has no time limit. That means the IRS can demand a return or start the assessment process for an unfiled tax return, regardless of how long it’s been.
Learn more about how far the IRS can go back for unfiled taxes, how far back they require you to file for compliance, and how to avoid putting yourself at risk. Looking for more personalized assistance with your tax situation? Call McLaud Law P.C. at 585-397-7785.
Key Takeaways
- There’s no statute of limitations on unfiled returns, meaning you might face an assessment at any time.
- If you don’t file, the IRS may use a substitute for return to assess your tax liability.
- The IRS only has 10 years to collect unpaid taxes, but the clock doesn’t start until you file or the IRS assesses tax against you.
- Most taxpayers only need to file six years of returns to get back into compliance.
- Tax refunds disappear after three years, although filing obligations do not.
Why People Assume That Old Unfiled Taxes Go Away
Many taxpayers believe that unfiled tax years eventually become irrelevant and that the IRS loses the power to collect what you would owe if you had filed. But that’s not the case.
As long as a tax return is unfiled, the obligation to file and pay remains open with no conclusive deadline. That means the IRS can theoretically go back to any unfiled year and demand a tax return, assess taxes against you, and start the collection process.
Why the confusion? There are a few different reasons why taxpayers mistakenly assume unfiled taxes go away:
- No IRS notices: If you haven’t received a notice, you may think the IRS doesn’t care about the unfiled returns, but sometimes, it can take years for the agency to reach out to non-filers.
- Misunderstanding the 10-year rule: The IRS only has 10 years to collect back taxes, but that statute only affects collections. If no return is filed, and no tax is assessed, the clock never starts.
What’s the Statute of Limitations on Unfiled Returns?
When a tax return is not filed and no tax is assessed, there’s no statute of limitations for assessing tax for that year or for holding you responsible for the unfiled returns.
Most IRS statutes of limitations start when a return is filed, or tax is assessed, including these two:
- Collection Statute of Limitations: The IRS has 10 years to collect taxes after a tax assessment.
- Assessment Statute of Limitations: The IRS has three years to assess additional taxes after a return is filed, but the deadline extends to six years in cases of significant income understatement and indefinitely when fraud is involved.
There’s also a statute that affects how long taxpayers have to claim refunds:
- Refund statute of limitations: You have three years from the filing deadline to request a refund, with very limited exceptions for extremely specific scenarios.
What Really Happens When Someone Hasn’t Filed for Years
Failing to file a return doesn’t mean the IRS will immediately assess taxes for the year in question and start levying your assets. Instead, they tend to progress slowly towards enforced collection actions:
- IRS notices: Non-filer notices include CP59, CP63, CP259, and CP515. You may also receive Form 15103.
- Substitute for Return: After multiple notices and attempts to secure voluntary compliance, the IRS may create a Substitute for Return to estimate your tax liability.
- Tax assessment: The IRS may assess the tax amount listed on the SFR if you don’t respond by the deadline on the notice of deficiency.
- Collection activity: The IRS may attempt to collect your tax debt by sending out multiple notices, placing a lien on your assets, and levying your assets or wages.
For some taxpayers, it takes years for these notices to start. A lot depends on how much third-party data is reported to the IRS, how much tax is paid on that reported income via payroll deductions and estimated tax payments, and how behind the IRS is on processing.
Unfiled Returns vs. IRS Substitute for Return
Even if a taxpayer doesn’t file a return, the IRS often receives information from third-party sources showing the taxpayer’s wages and other sources of income. If the income from those forms is never reported on a tax return, the IRS may choose to create a Substitute for Return on the taxpayer’s behalf.
A Substitute for Return is a bad deal for most taxpayers. It does not include deductions or tax credits, and it may not use the best filing status for you. As a result, SFRs often lead to inflated balances that far exceed what you’d owe if you filed your own return.
After an SFR is generated, you get a chance to dispute it or file a correct return, but there’s a strict deadline. If you don’t respond, the IRS will assess the taxes against you, the 10-year collection period will begin, and the IRS can attempt to collect what they are owed, with or without your cooperation. To avoid that, you need to file a return.
How to File Old Tax Returns
If you want to get caught up but you’re not sure where to start, you may want to begin by talking to a tax professional. If you don’t have the tax documents you need, a tax professional can help you get those documents and reconstruct business records as needed.
If you want to tackle your filings yourself, you should:
- Pull your IRS transcripts from your IRS account. This can show you which income sources were reported to the IRS for each year you did not file.
- Reconstruct your deductions with receipts and invoices. If you have deductions and credits for childcare expenses, tuition payments, and other expenses, look for proof of those payments so you can claim them on your tax return.
- Prepare returns. Most tax prep software lets you go back three years. Otherwise, you’ll need to file paper returns or work with a professional.
Filing old returns should not increase your audit risk, but if you’re worried, you may want to talk with a tax professional. They can help you file accurate returns or represent you if you’re selected for an audit. But remember, you don’t necessarily need to file all of your old returns – typically, you only need to file the last six years.
The IRS Six-Year Lookback Policy
Although tax law does allow the IRS to go back indefinitely on unfiled returns, the IRS simply does not have the time and manpower to actually enforce unfiled tax returns that are decades old. So, they typically only look back six years.
Per Policy Statement 5-133, the IRS generally considers a taxpayer to be compliant once they have filed their past six years of tax returns. For the average taxpayer, six years of filed returns is all it takes to become compliant.
There are exceptions, and it’s important to discuss your situation with a tax professional so you know how to protect yourself from surprise tax assessments. The IRS may require you to file more years of returns based on:
- Prior history of noncompliance
- Income from illegal sources
- Signs of intentional evasion or tax fraud
- Revenue office assignment
- High income in unfiled years
- Special circumstances affecting the taxpayer
These criteria do not apply to the vast majority of taxpayers, especially those who come forward voluntarily and choose to get caught up.
Criminal Risk and When Non-Filing Becomes Willful
One issue that comes up a lot with taxpayers who haven’t filed for years is the risk of criminal charges. Many people worry that not filing tax returns means that the IRS is moments away from pursuing criminal charges against them. However, the vast majority of non-filing cases are handled civilly, not criminally.
Criminal charges are only a risk for those who willfully and intentionally violate tax law. It’s generally reserved for those who commit tax evasion or tax fraud. For most taxpayers, not filing tax returns is an oversight, a mistake, or a result of not having enough money to pay taxes — not an intentional effort to cheat the IRS out of money.
The IRS may look further into a taxpayer’s history and documentation if certain red flags are present. False statements made to the IRS, a history of criminal charges related to tax fraud or evasion, or the use of offshore accounts to hide income may all lead to a more in-depth investigation.
For most taxpayers, criminal exposure is not a risk. Instead, resolving the issue of unfiled returns is just a matter of filing the returns, paying the amount due, and staying compliant going forward. However, if you are worried about criminal charges, you should reach out to a tax attorney as soon as possible.
How Long It Takes for the IRS to Pursue Non-Filers
There’s no cut-and-dry timeline for IRS enforcement. Some people get IRS notices the very first year they don’t file. Others go years without hearing anything from the IRS. The IRS may take action more quickly if:
- A taxpayer has high W-2 or 1099 income,
- There’s a long history of on-time returns and then no returns at all.
- The IRS receives ongoing third-party income reporting but no tax returns.
Bottom line: You may receive an IRS non-filer notice about six months after the deadline, or it could take five years or so.
When Professional Help is Necessary
A tax professional can provide guidance and assistance in all unfiled return situations, whether you have one missed return or decades of missed returns.
However, professional assistance is especially recommended if you’re facing:
- Multiple years of unfiled returns
- Complex income or deductions
- Missing records that make it hard to file on your own
- Substitutes for Return driving up your total tax bill
- Massive balances that are still growing due to penalties and interest
At McLaud Law P.C., our team understands the huge weight that unfiled returns can leave on your shoulders. Our tax attorney and team of tax resolution professionals work closely with you to explain your risk of exposure, what you need to do to catch up, and how to file returns in a way that protects you and allows you to claim any refunds you may still be owed.
Let’s talk about your next steps– to learn more, just call us at 585-397-7785 or contact us online to get one step closer to relief.
Frequently Asked Questions
Can the IRS really go back forever on unfiled taxes?
Legally, yes. In practice, they only require most taxpayers to file the most recent six years of returns to be compliant.
Do I need to file a return for every year I missed?
Most taxpayers only need to file the last six years to regain compliance in the eyes of the IRS.
What if I file more years than needed?
Once you file, you can’t take back the return. If you owe, the IRS will collect that money. That’s why it’s critical to talk with a tax attorney. Handling years of unfiled returns on your own can easily lead to expensive mistakes.
What if I can’t afford to pay after filing old returns?
You may be able to look into installment agreements, offers in compromise, currently not collectible status, and penalty abatement. A tax resolution professional like those at McLaud Law P.C. can help evaluate your options.
The IRS hasn’t contacted me yet—should I still file?
Yes. Voluntary filing generally gives you more payment options and less risk of enforced collection actions.
This communication is Attorney Advertising. It is presented for informational purposes only and does not constitute legal advice. Every legal situation is different, and prior results do not guarantee a similar outcome. This communication does not create an attorney-client relationship between McLaud Law P.C. and the recipient.
Sources:
https://www.irs.gov/irm/part4/irm_04-012-001
https://www.irs.gov/businesses/small-businesses-self-employed/notices-for-past-due-tax-returns
https://www.irs.gov/filing/time-irs-can-collect-tax
https://www.irs.gov/businesses/small-businesses-self-employed/filing-past-due-tax-returns
https://www.irs.gov/businesses/small-businesses-self-employed/irs-audits
