Unfiled Taxes? The Statute of Limitations on Back Tax Returns

Posted on 18. Apr, 2012 by in Back Tax Returns, Back Taxes, Filing back tax returns

One thing everyone always wants to know about unfiled taxes is: What’s the statute of limitations on them? This question has a simple answer: There is no statute of limitations.

There is a common belief that if a taxpayer simply doesn’t file his returns for a long period of time, then eventually, they will expire when their statute of limitations runs out. The truth, however, is that when you don’t file your taxes, the clock doesn’t start ticking – in fact, there is no clock. At least theoretically, the IRS can pursue the payment of back taxes from any year, no matter how long ago it was.

However, the IRS doesn’t often have to do that. If you have W-2s, 1099s, or other forms on which your income was reported to the IRS, but you didn’t file a tax return for the years those forms are from, then when 3 or 4 years have passed, the IRS will probably file a form called a Substitute for Return (SFR) on your behalf. This form does not allow you to receive the same number of deductions as you could have received if you had filed a tax return. Once an SFR has been filed, the IRS will begin the collections process, pursuing those taxes by any and all means available to them.

Unfortunately, many self-employed individuals mistakenly believe that if they go several years without filing their tax returns, they won’t be required to file them at all because a statute of limitations will have expired. Even if the IRS doesn’t have any official records of your earning any income, such as 1099s, this is simply not true. It is important that you file all your tax returns as soon as you can. The statue of limitations clock only starts ticking when you do file them. This clock usually runs for three years for federal taxes, and for four years in most states, but the IRS has the power to extend that statute at its discretion in some circumstances, such as when it suspects negligence or fraud.

Because there is no set statute of limitations on unfiled tax returns, the IRS could start collecting on your unfiled taxes at any time. Therefore, you must file your old returns as soon as possible. For help with filing unfiled tax returns, contact us today.

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