Unfiled Tax Returns

Do you owe past-due taxes? Rest assured that the IRS won’t show up at your door with handcuffs, but if you have unfiled tax returns, the federal law says you can face up to a year in jail and up to $25,000 in fines. Now that we have your attention, let’s talk about what you can do if you’ve missed some filing deadlines.

Wait a Minute, Maybe You Don't Need to File

That’s certainly true. Having a job that earns money doesn’t always require you to file tax returns. But most adults do fall under the requirement. Income earners under the age of 18 don't have to file if they can be claimed by another income earner as a dependent.

Adults who earn less than the minimum required for filing by law don’t have to file their returns either. Although, it’s still a good idea for people in both income-earner categories to do so. Most people in these positions are likely to get refunds; however, the IRS issues refunds only if a tax return is received. Filing a tax return may be in your best interest because it’s the only way to receive a refund.

Penalties for Unfiled Tax Returns

The IRS cites several reasons for unfiled tax returns. Some of these include hospital stays, the inability to get the needed information and more. Regardless of your reason for missing the filing deadline, penalties can be steep. The IRS assesses fines for unpaid taxes, as well as late or unfiled tax returns. In fact, the fine for missing a filing deadline, called a Failure-to-File penalty, is higher than the Failure-to-Pay penalty. Due to this reason, it’s prudent to file an income tax return, even if the tax you owe is more than you can currently pay.

Furthermore, the IRS has a program designed to offer workable options for paying back-tax debt. The program's called the Fresh Start Initiative, although, it has no provisions for unfiled tax returns. Consequently, filing on time is the only viable option to avoid incurring a steep penalty. A late-filing taxpayer should file as soon as possible to minimize the penalty.

How much is the penalty?

The Failure-to-File penalty is five percent of the unpaid tax due for each month that an unfiled tax return is late. This penalty is assessed for partial months, as well. So, the tax deadline is around April 15, but if a return is filed April 20, the full penalty is applied for the whole month. Likewise, if the return is filed on May 5, the full penalty is applied for that whole month, as well. As a result in this case, two months of penalties will be assessed to the outstanding tax balance, even though an unfiled tax return is remedied within a few weeks of the deadline.

Resolving Unfiled Tax Returns

To become compliant with the Internal Revenue Code, taxpayers must prepare and file returns for each year that’s missing. The taxpayer must also pay the back-tax debt, including assessed penalties and interest.

At Tax Champions, we take the ball out of your court and bring it to ours. We take over communications with the IRS on your behalf and request a copy of your transcripts.  While every case is unique, a typical outline of our services for clients with unfiled tax returns can be a variation of the following steps. First, our experienced and meticulous staff will carefully prepare your unfiled tax returns to determine how much you owe.

Once this step is completed and a balance is determined, we move on to the next phase. Next, we’ll analyze your financial health and ascertain the most effective program for your case in the Fresh Start Initiative. Then, we’ll negotiate with the IRS on your behalf to reduce your tax liability as much as possible.

We’ll work with the IRS to develop an affordable repayment arrangement. Finally, if you qualify, we’ll negotiate penalty abatements to reduce your tax liability as much as possible.

Substitutes for Unfiled Returns

If you don’t file a tax return, the IRS may file one for you. This is called a Substitute for Return. These returns are based on information that the IRS has on file. It doesn’t include deductions, exemptions or credits, so it will reflect an excessive tax liability.

The IRS will send a notice to the taxpayer asking him or her for permission to assess this tax. When the IRS doesn't receive a response, a notice of deficiency is sent, the tax is assessed, and the collection process begins. This may include a wage garnishment, bank levy or a lien on your property.

A Word of Advice on Unfiled Tax Returns

The final balance on your tax return is due at the time of filing. The IRS will allow certain arrangements to settle the debt in the form of affordable installment payments or another option if it can't be paid. Regardless of your ability to pay your tax bill, avoid the Failure-to-File penalty by filing on time. If something is stopping you from filing, the IRS is likely to approve a request for an extension on the deadline for free.

If you've paid at least 90 percent of your taxes at the time of your request, you may receive an extension. You can submit a payment with your request that will make you eligible for the extension. The IRS doesn't apply a Failure-to-File penalty to most taxpayers if an extension is granted. However, keep in mind that you'll have to pay the remaining balance by the extended due date to avoid a Failure-to-Pay penalty.

Why Should Tax Champions Help Me With Unfiled Returns

We’ve been helping taxpayers resolve their tax issues for over 35 years. We understand that unfiled tax returns can be a stressful burden, so we make the process as easy as possible on our clients.

Every case has varying details that require specialized attention. Give us a call today at 800.518.8964. One of our knowledgeable and experienced staff will be happy to discuss your case. We’ll talk about your needs and goals so that we can determine the best course of action to bring you into compliance with the IRS with the best possible outcome.

You’ll leave your first discussion with Tax Champions with clarity about your options. We’ll also commit to a flat fee for the services we discuss. We’ll be happy to have this conversation with you with no strings attached. There’s never any obligation to hire our firm.

Tax Champions has been an accredited and reputable service for decades. We have an A+ rating at the Better Business Bureau and no customer complaints. There are no complaints with the Board of Accountancy nor the IRS. We strive to meet and exceed our client’s expectations every time.

What's the First Step?

Reconciling unfiled tax returns and back-tax debt seems more daunting as time passes by. What may feel like a stress-level 10 to you doesn’t feel the same to us. We work with the IRS on cases like yours day-in and day-out. We have our finger on the pulse of ever-changing tax law and IRS procedure. All you need to do to get the ball rolling on your case is give us a call.

We’re available seven days a week, morning, noon, and night for the convenience of our clients, new and old. If you’d like us to reach out to you, we’re happy to do so. Just send us your contact information in the blue box on the right side of this page. You can also use the chat feature for live help from one of our knowledgeable staff.

Contact us today. We’re ready to help. Sleep better tonight knowing that you have savvy tax professionals in your corner resolving your issue.


[1] Eight Facts on Late Filing and Late Payment Penalties. (n.d.). Retrieved from //www.irs.gov/newsroom/eight-facts-on-late-filing-and-late-payment-penalties

[2] How to Get Tax Transcripts and Copies of Tax Returns from the IRS. (n.d.). Retrieved from //www.irs.gov/newsroom/how-to-get-tax-transcripts-and-copies-of-tax-returns-from-the-irs

[3] Taxchampions | Better Business Bureau® Profile. (n.d.). Retrieved from //www.bbb.org/us/ca/ventura/profile/tax-consultant/taxchampions-1236-92012281

[4] How to Handle Unfiled Tax Returns //taxreliefprofessional.com/unfiled-tax-returns

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Walter Wotman, CPA

Founder & Managing Partner

Walter Wotman's Tax Champions authored this helpful Guide to IRS Tax Resolution for American taxpayers. He is one of America's most experienced tax negotiators with over 35 years of experience helping thousands of clients settle difficult back tax issues.

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