Believe it or not, it is a federal and NYS crime to intentionally not file your tax returns by the annual tax return filing deadline date. In NYS, it is considered a misdemeanor for each year that you intentionally do not file a tax return timely and rises to a felony when three or more consecutive years of tax returns go unfiled. Even though it is uncommon for the IRS and NYS Department of Taxation and Finance (DTF) to pursue criminal sanctions for the failure to file tax returns, it is not unheard of, and it has happened before. The tax professionals at McLaud Law P.C. have represented hundreds of taxpayers with unfiled tax returns, some of whom were criminally investigated and/or prosecuted for the failure to file tax returns timely.
Careful management and decisive action are the keys to safely dealing with a situation of unfiled tax returns. If handled properly, the risk of unfiled tax returns turning criminal can be kept low in most cases. It is also possible to achieve other relief that makes the financial burden of getting back into compliance with the tax law less severe.
New York State has an amnesty program for people with unfiled returns or underreported tax that the DTF has not yet discovered. If the DTF has sent notices or estimated assessments for the tax type and period of the unfiled returns, you will not be eligible for the program, so it can be critical to apply to the amnesty program right away, as it is impossible to know when the DTF will discover the issue on its own. Once accepted into the program, the benefits it offers are 1) protection from criminal prosecution for the tax issues disclosed, 2) abatement of all associated penalties, 3) a reduced interest rate on the taxes owed, and 4) the possibility of some of the unfiled returns being forgiven in their entirety.
You may be owed a refund on your unfiled tax returns if your withholding exceeded the tax you owe in that year. You have a limited amount of time to file your claim for a refund. Generally, you must submit your claim to the IRS within three years of the due date of the tax return or within two years of paying the tax, whichever is later. If you have multiple unfiled tax returns, you can easily lose refunds to this short timeline, so it is in your interest to address the situation quickly if you anticipate refunds showing on your returns.