Unfiled Taxes

The IRS requires you to file an income tax return if your income is over a certain threshold based on your filing status. For 2023 tax returns due in 2024, the filing thresholds are as follows:

• Single $13,850
• Head of household $20,800
• Married filing jointly, qualifying widow(er) $29,200

If you’re age 65 or older, the filing threshold for single and head of household increases by $1,850. For married filing jointly, you get an extra $1,500 for each spouse age 65 or older. If you’re claimed as a dependent on another person’s tax return, you should file if you have earned income over the threshold or unearned (for example, investment income) income over $1,250. Note there are slightly different rules for married dependents and dependents over the age of 65.

Regardless of the above numbers, you also must file a tax return if you have any of the following special situations:

• Earn over $400 in net self-employment income – That’s total self-employment revenue minus expenses.
• Owe the alternative minimum tax (AMT).
• Owe social security or Medicare on tips not reported to your employer.
• Owe household employment taxes.
• Owe recapture taxes.
• Received MSA or health savings account distributions.
• Earned $108.28 or more from a church or church organization that is exempt from paying the employer portion of SS and Medicare taxes. 
• You claimed advance payments of the premium tax credit which covers health care premiums purchased from the marketplace.

If you are required to file and you don’t, you can face consequences. However, in a lot of cases, even if you’re not required to file, you may want to so that you can claim refundable tax credits from the IRS or state. Also, it is often a good idea to file your tax return even when not required, to prevent the taxing authorities from preparing their own estimated return, as will be discussed next.

What are the consequences of unfiled tax returns?

If you don’t file a tax return, the IRS may prepare a “substitute for return” (SFR) for you. The IRS uses SFRs to assess taxes against people who haven’t filed, and typically, these returns include all income reported to the IRS in your name (on W2s, 1099s, and other forms received from payers) but not any deductions or credits. 

Once the tax has been assessed, the IRS can start collection actions against you. Typically, the process starts with the IRS sending notices demanding payment. Then, the agency may issue a lien and start levying your assets. If you have unfiled state returns, the state can take similar actions against you.

Additionally, you may face personal financial problems if you don’t file a tax return. In particular, most mortgage lenders use tax returns to verify income, making it very difficult to buy a home if you haven’t filed. 

What if I have unfiled taxes and owe money?

If you owe money, you will incur penalties for not filing, and the longer you wait to file, the higher the penalties will be. Additionally, if the IRS or the state issues a return on your behalf, they may start collection actions such as tax liens, tax warrants, wage garnishments, and asset seizures. 

A lot of people delay filing because they aren’t sure how they are going to deal with the tax liability, but there are options. If you’re dealing with unpaid IRS taxes, you may be able to set up a payment plan, apply for an offer-in-compromise settlement, or explore other relief options. These are things that tax professionals like those at McLaud Law can help you navigate. Don’t incur additional penalties just because you don’t know how to deal with your tax liabilities. Call us for help!

What if I have unfiled taxes but I don’t owe money?

Technically, the requirement for filing a tax return (discussed above) still holds true, even if you don’t owe any tax. However, in most cases, if you have unfiled returns and don’t owe any money, there is not much likelihood of the IRS or state coming after you. In these situations, the main issue is that you may be missing out on a tax refund.

However, there are some cases where you can incur penalties for unfiled returns even if you don’t owe any money. In particular, this applies to informational returns for business taxes, and if you collect sales tax in New York, you must file a return even if you had no sales during the period.

How long can I claim a refund on an unfiled tax return?

You have three years from the filing deadline to file tax returns to collect a refund, and you should definitely do so. Every year, a significant amount of money goes unclaimed–for 2019 alone, the IRS estimates that taxpayers didn’t claim $1.5 billion in refunds. 

Can I get a mortgage with unfiled taxes?

Most mortgage lenders require a copy of your tax return to verify your income when you apply for a mortgage, especially if you’re self-employed. You may be able to get around this requirement by taking an alternative approach such as an owner-carry mortgage, a loan from a high-risk lender, or a sub-to mortgage, but most of these options have more risk and higher interest rates than traditional mortgages. 

If you’re behind on your taxes and want to buy a home, consider talking with a tax attorney. They can help you get caught up so that you have all the tax documents you need to apply for a mortgage. 

Can I go to jail for unfiled tax returns?

In most cases, you will not go to jail for unfiled tax returns. However, if the IRS or the state determines that you purposefully didn’t file your tax returns in an attempt to evade paying taxes, they may pursue criminal charges against you. In criminal cases, you can face fines and imprisonment.

How far back can the IRS go for unfiled taxes?

The IRS can go back as far as it wants for unpaid taxes, but typically, the agency only looks back six years.

If you come forward voluntarily to catch up on your taxes, the IRS will usually only request the last six years of returns. So even if you’re decades behind, you typically only need to deal with the last six years. 

What about unfiled New York State taxes?

New York State’s Department of Taxation and Finance works much in the same way as the IRS does. You are required to file NYS tax returns whenever you are required to file IRS tax returns, and if you don’t file your returns, they may issue an estimated assessment, which works the same way as an IRS Substitute For Return. Although criminal prosecution for unfiled NYS tax returns is highly unusual, it is possible and if you have at least three years of returns unfiled, you could be charged with a felony.

The biggest difference between NYS and the IRS is that NYS has a much more robust and helpful amnesty program called the Voluntary Disclosure and Compliance Program. If a taxpayer qualifies for the program, they can receive benefits such as protection from criminal prosecution, penalty abatement, and potential reduction of the years that need to be filed to be deemed compliant.

VDCP is a great program, but it needs to be managed properly to receive the full benefit. You can be deemed ineligible for the program if NYS has already issued estimated assessments, so the sooner you enter the program, the better your chances of obtaining the best result. If you are behind in your NYS tax filings, call a tax attorney like McLaud Law PC to discuss how to get the most benefit possible from this program.

Is there a statute of limitations on unfiled tax returns?

There is no statute of limitations on unfiled tax returns. The IRS has strict limits on how far it can go back to review filed returns. The agency has three years to audit and assess taxes on a filed return and up to six years in cases of fraud. 

However, the clock starts ticking when the returns get filed. If the returns aren’t filed, the clock never starts. In theory, this means that the IRS can go back an unlimited amount of time to assess tax against you, but in practice, the IRS usually only goes back six years. 

How can I file past-due tax returns?

To file past-due tax returns, find the tax return from the year(s) you didn’t file. Then, gather your income documents. Contact old employers to ask for copies of W2s or set up an online IRS account to download wage and income transcripts. If you were self-employed, use bank and credit card statements to figure out your income and expenses.

If you’re not sure where to start, consider contacting a tax attorney who deals with tax preparation like McLaud Law. They can help you contact the IRS for missing info and prepare the returns. Then, they can help you make a plan to deal with your back taxes. If you haven’t been filing in an attempt to evade taxes, a tax attorney can also help you look into the IRS’s criminal voluntary disclosure program and figure out the best way to move forward.

How can I unfile a tax return?

There is no way to unfile a tax return. Once you drop a tax return in the mail or e-file it, you cannot cancel the process. However, if you realize that you have made a mistake, you can amend your tax return. 

Get Help With Unfiled Returns Now

If you have unfiled personal or business tax returns, the qualified team at McLaud Law can help you get caught up. Dealing with other tax problems? Then, we can also help you find solutions to those as well. Don’t let IRS or state taxes stress you out any longer. Instead, contact us today or request a free consultation now.