How Far Back Can The IRS Collect Unfiled Taxes?

As U.S. citizens, we are expected to file and pay our taxes on time each year. When we fail to submit a tax return, we put ourselves at risk of IRS collection activities. The IRS has the power to cause financial hardships for you and your family. However, maybe it’s been a couple of years since you last filed your return. Do you think the IRS has forgotten about you? If you do, you’d be wrong. The IRS has unlimited resources and time when it comes to collecting on back taxes that you owe the government. 

What is the statute of limitations for unfiled taxes?

Many taxpayers believe the IRS can’t touch them if they haven’t filed a tax return in ten years. The IRS can only collect on tax debts that are ten years or younger. However, the ten years doesn’t begin when you neglect, either accidentally or on purpose, to file your return. Instead, the ten-year period starts when the IRS notices your missing return. The ten-year period can also begin when you file the return or when the IRS files and submits a substitute return on your behalf. Once the ten-year period begins, you have a limited time frame within to act. If you don’t act quickly, you may put yourself at risk for civil or criminal penalties.

How long do you have to collect a tax refund?

The IRS will only allow you to collect on tax refunds you’re due within the last three years. If you have refunds from four years ago or more, you lose the rights to the money. Your refund then becomes the property of the United States Treasury. Even if you’ve entered the statute of limitations period, you may still want to file. Filing taxes will ensure you receive proper credit for those tax years. If you have missing tax returns, it’s shown as not having paid into the tax system for those years. You may shortchange yourself when you want to collect Social Security and Medicare benefits later in life. 

For that reason, it’s crucial you file and submit your tax returns as soon as possible. If you need help or aren’t sure what forms to use, contact Platinum Tax Defenders to help you.

IRS Statute of Limitations for Unpaid Taxes

The IRS begins its statute of limitations period when it discovers you have missing returns. It also starts when you choose to file and submit the returns yourself. However, the statute of limitations can even begin once other events take place. As an example, if you file an appeal on your back taxes, you start the clock over again.

Additionally, if you file an Offer in Compromise, you begin the statute of limitations all over again. The statute of limitations may also restart for your past due taxes if you sign a waiver or file for bankruptcy. If you have missing tax returns, do not worry about the IRS statute of limitations. It’s vital for you to file the taxes and figure out a way to pay what you owe the IRS.

Substitute Tax Returns

For some cases, the IRS may file missing tax returns on the taxpayer’s behalf. When the IRS files tax returns for you, it’s called a Substitute for Returns. The IRS files the substitute tax returns after a taxpayer unwittingly or purposely neglects to file returns on their own. When the IRS files a substitute return, it assumes you are single with no dependents to claim. What does this mean? The substitute return won’t take into account any deductions for which you may be eligible. For that reason, you may end up owing more money than necessary.

Submitting an amended tax return

Even if the IRS submits a substitute tax return, you can still file and submit an amended tax return. You can claim the correct filing status and claim deductions for which you may claim. Additionally, you may be able to lower your tax obligations to the IRS significantly. However, you must act fast when filing an amended tax return after the IRS files a substitute return. If you don’t file an amended return, the IRS can proceed with collection activities against you.

Risk of criminal charges

The IRS has many methods it uses to collect back taxes you owe. First, the IRS will send you a Notice and Demand for Payment, to which you have ten days to respond. If you don’t respond, the IRS will send another notice. The subsequent notice the IRS sends is a Final Notice of Intent to Levy. Once you receive this notice, you have 30 days to respond. If you don’t respond to the final notice, the IRS can pursue debt collection actions such as levies, garnishments, and asset seizures.

Collection actions for unpaid taxes

There are several collections actions the IRS can take for payable taxes. Among those collections actions are:

–    Levy assets like real estate or your house

–    Garnish your wages or salary

–    Take your retirement savings

–    Seize boats, cars, and other property

–    Claim the value of your life insurance policy

Once the IRS has begun any collection activities, it won’t usually stop. It will often take you filing for bankruptcy to stop them. Even then, the bankruptcy court may allow the IRS to claim some of your assets to settle back taxes.

Fines for failing to pay back taxes

If you are seriously delinquent with your tax filings, the IRS may charge you a fine of up to $100,000 if you are a private taxpayer. Additionally, the IRS can charge you up to $200,000 if you are a corporation. You may also face a year in jail for each year you did not file a tax return.

Get Help From A Tax Relief Professional

Hiring a tax relief specialist can get you a better deal when attempting to pay off back taxes. A tax attorney can help you determine which repayment method is right for you. The tax resolution specialist can also negotiate with the IRS on your behalf and submit the necessary paperwork. Owing back tax debt can leave you in bad financial shape. The IRS only wants to get what money you owe them in back taxes. Often, they are willing to help you settle back taxes, but you have to know how to try. That’s where a tax relief services company can come in handy. When you hire a tax resolution professional, there are other methods you can use to avoid expensive back tax debt. Call Platinum Tax Defenders for a free consultation today.

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