Latest Facts and News
- The Inflation Reduction Act provided resources to the IRS to increase enforcement, but recent budget changes froze $20 billion, affecting audits.
- The IRS introduced new online tools like Free File for tax preparation, Get Transcript for filing history, and Where’s My Refund? to track refunds.
- As of March 14, 2025, the IRS has received 70.4 million returns, a 1.7% decrease from last year, indicating many still need to file.
Every year, millions of people avoid filing their taxes, thinking it’s a problem they can push aside. But what starts as a small delay can quickly turn into significant financial and legal trouble. Missing tax deadlines can lead to massive penalties, interest, and even IRS enforcement actions like levies or garnishments.
An Unfiled Tax Returns Lawyer can help you handle this stressful process, reduce penalties, and protect your finances.
This guide covers everything you need to know about unfiled tax returns and how a tax attorney can help you resolve these issues.
Understanding the consequences of unfiled tax returns
The IRS has powerful enforcement tools at its disposal, and knowing what you’re up against will help you make informed decisions about how to proceed.
Civil penalties for non-filers
The IRS imposes the following civil penalties on taxpayers who don’t abide by tax laws:
- Failure-to-file penalty: If the return is late, up to 5% of the unpaid taxes for each month, with a maximum of 25%.
- Failure-to-pay penalty: Charged at 0.5% of the unpaid tax for every month, up to 25% of the total unpaid amount.
- Interest charges on unpaid taxes: Daily compounded interest on unpaid taxes, the rate set quarterly based on the federal short-term rate plus 3%.
- Loss of refunds: Not filed within three years, no chance of future refund.
- Ineligibility for future tax relief: Missing returns can prevent you from qualifying for programs like the Offer in Compromise or Innocent Spouse Tax Relief.
Criminal consequences of tax evasion
Consequences that taxpayers may face are as follows:
- Misdemeanor: If a taxpayer intentionally fails to file, they are charged with one year in prison and fines of up to $25,000 for individuals (or $100,000 for corporations).
- Felony: Inflating deductions and underreporting income to avoid taxes, taxpayers are charged with tax evasion, which is a felony. Such an act is punishable by fines of up to $100,000 or five years in prison for individuals and $500,000 for corporations.
| For Instance → Wesley Snipes, the Hollywood actor, was convicted in 2008 for tax evasion after he failed to file returns for several years. He was sentenced to three years in prison and had to pay millions in back taxes, penalties, and fines. More recently, in 2023, reality TV star Todd Chrisley began serving a 12-year prison sentence for tax evasion and bank fraud after hiding income from the IRS and falsifying documents to obtain millions in loans. |
How does the IRS identify non-filers?
The multiple methods used by the IRS are as follows:
- Matching information returns: The IRS compares taxpayers’ income data with correspondence W-2s, 1099s, and bank statements.
- Third-party reporting: Information provided by employers, banks, and other entities helps the IRS in identifying red flags
- Automated systems: The IRS uses automated data processing to identify non-filers based on income levels and prior history.
IRS enforcement actions
Once the IRS identifies a non-filer, it may take several enforcement actions:
- Automated notices: The IRS sends notices requesting overdue returns.
- Substitute for return (SFR): If no response, the IRS files a substitute return, often resulting in higher penalties.
- Tax liens and levies: In serious cases, the IRS may place liens on property or seize assets to collect unpaid taxes.
How an unfiled tax return lawyer can help?
Most people have an idea that a tax attorney can help with penalties and tax resolutions. There are lesser-known, yet incredibly valuable benefits that an unfiled tax return lawyer renders:
1. Mitigating penalties and interest
Unfiled taxes typically come with hefty penalties and interest that compound over time, making the situation worse. As your tax lawyer, we can negotiate with the IRS to potentially reduce or eliminate penalties, especially if you can prove reasonable cause for not filing.
2. Helping you through the IRS’s streamlined procedures
The IRS offers certain programs, such as the Streamlined Filing Compliance Procedures, for taxpayers with unfiled returns who owe less than a certain amount. A tax lawyer can help you determine whether you qualify and can guide you through the process.
3. Restoring your filing history
If your tax history is incomplete, an unfiled tax return lawyer can help restore your credibility with the IRS. Even better, they can help you prepare and file those unfiled returns in a way that satisfies the IRS requirements. This often includes making sure past returns are accurate so they don’t trigger audits or increase liability.
4. Avoiding future tax liens and levies
When you have unfiled returns, you’re at risk of the IRS filing a tax lien or initiating a levy against your assets. An unfiled tax return lawyer can help you avoid these aggressive collection tactics by ensuring your returns are filed properly and on time, sometimes even negotiating a payment plan that avoids more drastic measures.
Once you decide to address your unfiled returns, your attorney can help you choose the best voluntary disclosure program for your situation.
| CTA Banner → Ready to resolve your unfiled tax returns? Our team at Hall’s IRS Solutions is here to help you overcome this challenging situation. Hear what our clients have experienced with our services → “First, they put me at ease knowing that what I thought was the end of the world and would put off was not entirely the case. They took over and worked tirelessly to resolve my issues. They now handle my payroll which has even taken a greater load off of me. By far hiring a professional to handle something as important as tax/book keeping/and payroll issues has been the best decision I have ever made. I only regret that I did not contact Tina Hall earlier.” – Rick S Contact us today for a confidential consultation and take the first step toward tax compliance and peace of mind. |
Navigating IRS voluntary disclosure programs
If you’re behind on your tax returns, a tax attorney can help fix your situation through voluntary disclosure programs, guiding you back into compliance and minimizing penalties.
Streamlined filing compliance procedures
For taxpayers, both domestic and foreign, who non-willfully failed to file. This program allows them to catch up on missed returns with fewer penalties.
Benefits:
- No penalties for unfiled returns (except interest)
- Simplified process with fewer requirements
| Forms: IRS Form 14653 for Streamlined Filing Compliance Procedures Form 1040-X for Amended Returns |
Voluntary disclosure practice
This program is designed for taxpayers who willfully failed to comply with tax laws, such as unreported foreign income or bank accounts
Benefits:
- Ability to avoid criminal prosecution
- Opportunity to reduce penalties
| Forms: IRS Form 14457 for Voluntary Disclosure Practice Pre-Clearance Request |
Always ensure compliance with the IRS guidelines, or let Hall’s IRS guide you through every step of the process.
Delinquent FBAR submission procedures
This particular program allows taxpayers with foreign accounts (where the combined total of all foreign accounts exceeded $10,000 at any point during the calendar year) to catch up on reporting without facing severe penalties.
Benefits:
- Penalty waiver for non-willful failures.
- Submit a delinquent FBAR (Foreign Bank Account Report) without hefty fines
| Forms: FinCEN Form 114 (FBAR) IRS Form 114 for reporting accounts |
Negotiating with the IRS on your behalf
An unfiled tax return lawyer helps in negotiating with the IRS, thereby reducing penalties and setting up payment plans to resolve tax issues.
Q1: How does the IRS decide whether to accept an Offer in Compromise?
- Mistake: Misunderstanding your ability to pay or failing to provide complete financial details.
- Outcome: Report income and expenses properly to help the IRS assess your ability to pay and increase your chances of approval.
Q2: Can I negotiate the penalties the IRS imposes on my unpaid taxes?
- Mistake: Assuming penalties are non-negotiable
- Outcome: Consult an attorney to request penalty abatement, especially if you have a valid reason such as a natural disaster or medical emergency.
Q3: What happens if I can’t afford to pay the full tax debt?
- Mistake: Avoiding payment options
- Outcome: Hire a tax attorney to set up installment agreements with the IRS, thus avoiding aggressive actions like levies or wage garnishment.
Q4: Will the IRS delay collection actions if I am facing financial hardship?
- Mistake: Failing to request relief.
- Outcome: Temporarily suspends IRS collection action by appointing a tax attorney and applying for “Currently Not Collectible” status.
Steps to take when you have unfiled tax returns
Here’s a clear step-by-step breakdown to help resolve unfiled tax returns to avoid penalties and potential IRS enforcement.
Follow each step carefully.
| Steps | Timeframe | Actions |
| Step 1: Gather Financial Documents | Mostly 1-2 Days | You should collect all necessary tax-related documents (W-2s, 1099s, bank statements, and receipts of expenses) |
| Step 2: Determine Unfiled Years | Only 1 Day | You should identify the years you missed tax filing and prioritize the most recent one first. The IRS requires you to file for the last six years. |
| Step 3: Assess Your Ability to Pay | Mostly 1-2 Days | You should assess your ability to pay debt. The IRS offers installment agreements, offers in compromise, and penalty abatement. |
| Step 4: Voluntary Disclosure Options | Almost 1-2 Weeks | If your non-filing was non-willful, use IRS Voluntary Disclosure Options like Streamlined Filing or Delinquent FBAR for reduced penalties. |
| Step 5: Seek Professional Assistance | Mostly 1-2 Days | Consult a tax lawyer to assist in reducing penalties or negotiating with the IRS on your behalf. |
| Step 6: Prepare and File Returns | Almost 1-4 Weeks | You should complete and submit missing returns through Form 1040-X (Amended Returns) |
| Step 7: Negotiate Payment Plans (Check Eligibility in Detail) | Almost 1-2 Weeks | You should negotiate payment arrangements with the IRS or even use an offer-in-compromise to settle for a reduced amount. |
Gathering necessary documentation
Here’s a list of all the necessary documents required to file for back taxes accurately.
- W-2 and 1099 forms: These forms report employment, contractor, and freelance income.
- Bank statements: These statements show all transactions done during the tax year to verify income, expenses, and deductions.
- Investment records: Documents related to dividends, capital gains, or earnings from investments, including broker statements.
- Business income and expense records: For business owners (including corporations, LLCs, partnerships, and sole proprietorships), profit and loss statements, invoices, receipts, and other documents related to income and expenses.
- Receipts for deductibles: Collect receipts for expenses like medical bills, charitable donations, and other business-related expenses.
- Prior tax returns: If available, gather prior-year tax returns to help with carryovers and comparisons.
Tips for obtaining missing documents
- From employers: Contact your employer for duplicate W-2s or 1099s.
- From the IRS: Request a transcript using Form 4506-T.
💡Pro Tip: Use the IRS Get Transcript tool to determine your tax records and transcripts effectively
Understanding the statute of limitations
The statute of limitations determines how long the IRS can pursue tax claims or issue refunds. The general statutes for tax returns are as follows:
- 3-Year statute for refunds
The IRS provides 3 years from the filing date; if you don’t file within this period, you lose the right to claim any refund.
| Scenario → Adam filed his tax return for 2020 on April 15, 2021. He has until April 15, 2024, to claim any refund, as after that, no refund will be issued. |
- 6-year statute for substantial understatement of income
If you understate your income by more than 25%, the IRS will go back 6 years to assess additional taxes.
| Scenario → Lisa underreported $30,000 of freelance income in 2019, which is over 25% of her total income. The IRS can assess taxes on her income until 2025. |
- No statute of limitations for unfiled or fraudulent returns
If you fail to file a return or file a fraudulent return, there is no statute of limitations, as the IRS can pursue these cases indefinitely until resolved.
| Scenario → Sarah didn’t file her tax return for 2018. If she files in 2025, she forfeits her chance at any refund, and the IRS can pursue collections indefinitely. |
Also Read → Understanding Why Your Tax Refund Wasn’t Sent After an Offer in Compromise
Get the help you need with Hall’s IRS solutions
Imagine the peace of mind knowing you have trusted experts guiding you through the unfiled tax returns process.
You’re in luck because the tax experts at Hall’s IRS handle all the necessary formalities and guide you in the right direction to avoid any future tax issues.
FAQs
At times, failure to file taxes can lead to severe consequences such as criminal charges, fines, and imprisonment in case of willful evasion. If you’re concerned about unfiled returns, our team at Hall’s IRS can help you understand the process, reduce penalties, and avoid serious consequences.
If the IRS suspects fraud or if returns were never filed, the IRS investigates for previous years, irrespective of the timeframe. For substantial understatement of the income, the IRS looks back at six years of tax records. As your unfiled tax return lawyer, we can help you file overdue returns and work with the IRS to resolve your tax issues.
If you’re struggling to pay the taxes owed from unfiled returns, the IRS offers installment agreements or an Offer in Compromise to reduce the amount you owe based on your financial situation. In some cases, you might qualify for Currently Not Collectible status, which can pause IRS collection actions.
Yes! If you don’t file, the IRS may file a Substitute for Return (SFR) based on limited data, leading to higher penalties. It’s best to file your return for accuracy, but in case you face issues, seek help from an unfiled tax return lawyer at Hall’s IRS to get through the process and avoid penalties. Reach out to us today.
You risk losing your refund if you don’t file a return. You can still claim a refund for unfiled taxes within three years from the original filing deadline. However, if you miss this window, act quickly and get help from the Hall’s IRS tax attorney, who will guide you through the process to claim eligible refunds.
