IRS Statute of Limitations on Unfiled Tax Returns

Episode 72:  In this episode, Timalyn addresses how long the IRS has to collect taxes from a taxpayer if they have unfiled tax returns. 

Not filing taxes is not a get out of jail free card. You may yet be on the IRS’ radar. 

What are the different IRS statute of limitations?

Many taxpayers believe that the IRS only has 3 or 6 years to assess tax for a certain year on their account. That is incorrect. What they are mistaking that for is the Assessment Statute Expiration Date (ASED). The IRS has 3 years after your taxes were initially assessed to assess additional tax for that year. If the IRS suspects frivolous activity, they have 6 years to assess tax for that tax year. 

Once the tax has been assessed, the IRS has 10 years from that date to collect. This is called the collection statute expiration date (CSED). 

If no tax return has been filed, the IRS has an unlimited amount of time to assess tax for that tax year. This is why Timalyn urges taxpayers to take control of the situation and not give the IRS an open door to come assess tax on their account. 

When the IRS prepares the return for the taxpayer, it is called a substitute for return (SFR). The IRS takes the third-party documentation that has been reported to them and creates a return, and assesses the taxpayer penalties for not filing. The IRS does not take into consideration all of the deductions or credits that the taxpayer may be entitled to. This is another reason why Timalyn urges taxpayers to take control of their own situation and to file instead of having the IRS file for them.

What if I have unfiled tax returns?

Don’t put your head in the sand if you have years of tax returns to file. Take a deep breath and take control. If you are expecting a refund, you only have 3 years from when the tax return was due to claim that refund. This is called the refund statute expiration date (RSED). If a payment was made that you didn’t have to make toward a year, then you have 2 years from the date of the payment to claim a refund of that payment. 

If you have balances or are anticipating balances that you cannot pay in full, the IRS only requires you to file the past 6 years of returns to be eligible for a payment arrangement. In addition to that, you must also get current with your withholding/ estimated tax payments. 

So if you haven’t filed in 10 years, don’t file years 7 -10. The IRS will not require it. If you were due refunds in years 4,5, and 6, the IRS may allow you not to file those since they won’t add to the balance, and you can’t claim the refunds. 

Once you’ve done you’re part to get into tax compliance, you can negotiate a payment arrangement. In episode 10, Timalyn talked about Installment Agreements. She also explains what an offer in compromise is and how to qualify for an offer in compromise. If your situation doesn’t fit either of those currently not collectible status may be the right option for your account.

These episodes are hyperlinked as a resource for you to find out more about how they work. Timalyn doesn’t judge the tax competency of taxpayers. But she does urge them to get the help they need. Even if it isn’t with her.

Need Tax Help Now?

If you need answers to your tax debt questions, book a consultation with Timalyn via her Bowens Tax Solutions website.  Click this link to book a call.

Please consider sharing this episode with your friends and family.  There are many people dealing with tax issues, and you may not know about it.  This information might be helpful to someone who really needs it.  

As we conclude Episode 71, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Spotify, Apple Podcasts, YouTube, and many other podcast platforms.  

Remember, Timalyn Bowens is America’s Favorite EA, and she’s here to fill the tax literacy gap, one taxpayer at a time.  Thanks for listening to today’s episode.

For more information about tax relief options or filing your taxes, visit https://www.Bowenstaxsolutions.com/ .

If you have any feedback or suggestions for an upcoming episode topic, please submit them here:  https://www.americasfavoriteea.com/contact.

Disclaimer:  This podcast is for informational and educational purposes only.  It provides a framework and possible solutions for solving your tax problems, but it is not legally binding.  Please consult your tax professional regarding your specific tax situation.