Unfiled Tax Returns
When the IRS contacts you regarding your unfiled tax returns, do not panic. The problems incurred by taxpayers who have not filed all of their tax returns can generally be resolved with the assistance of an experienced tax attorney, if timely addressed. However, when taxpayers fail to file returns and ignore the duty to do so, severe penalties for non-compliance may result, up to and including criminal tax prosecution.
Typically, the IRS will not seize assets or garnish wages if tax returns are filed and steps are taken to enter into a payment arrangement, even if you are unable to pay all of the tax that is due. It is not uncommon for taxpayers to misplace records such as W-2’s, 1099’s, and business receipts. Do not let this stop you from filing your tax returns. Our tax attorneys have extensive experience with this situation, and are often able to obtain the information and documentation needed to prepare an accurate tax return from the IRS and other sources. After preparing and submitting the tax returns, we will negotiate with the IRS and state taxing authorities to resolve the tax debt that is due. It is critical to act quickly to avoid even harsher penalties or criminal sanctions.
How Many Years of Tax Returns Should I File?
Although the Internal Revenue Code has no statute of limitations for unfiled tax returns, the government generally does not require all tax returns to be filed. IRS Policy Statement 5-133 and Internal Revenue Manual 188.8.131.52.18 provide for a manageable six years of unfiled tax returns in most instances.
Willful Failure to File Tax Returns
If a taxpayer’s failure to file tax returns was willful, or if deemed fraudulent, the IRS does not adhere to the six-year policy due to potential criminal implications. Instead, it may be possible to utilize the IRS’s Domestic Voluntary Disclosure Program to avoid criminal prosecution in almost all cases. To qualify, a taxpayer must (1) voluntarily disclose that tax returns have not been filed prior to the initiation of a civil or criminal investigation, (2) file complete and accurate tax returns, or cooperate with the IRS in determining the correct tax liability, and (3) make full payment of the amount of tax due, or make good faith arrangements to pay the tax, penalties, and interest over time. If a voluntary disclosure is properly made, the chances of criminal prosecution are greatly reduced.
Most taxpayers with unfiled individual or business tax returns start by contacting their previous tax accountant. Taxpayers should be careful in doing so because the federal government—and most states—recognizes a very limited privilege for accountant-client communications, and confidentiality rules only apply to civil tax disputes. Only the attorney-client privilege will protect confidential communications from being used in a criminal proceeding. Since this privilege is vital to a criminal defense, it is extremely important to speak with a tax attorney if there is any chance of a criminal investigation related to unfiled tax returns.
Contact an Experienced Attorney from the Sacramento Area
If you have unfiled tax returns and are worried that the IRS may take action against you, we encourage you to speak with a tax attorney from NewPoint Law Group. To schedule a free consultation, call 1-800-358-0305 or contact us online today.