Unfiled Income Tax Solutions

The IRS is mandated to assess the correct tax liability by either “securing a valid, voluntary tax return from the taxpayer…or computing tax, interest and penalties based upon the information submitted by payers or other available (third party) information”.

The period of years back for which the IRS will want to secure unfiled tax returns, the enforcement period, is generally six years, however the facts and circumstances of each case may dictate longer or shorter enforcement periods.

Factors which will affect the enforcement period are:

• The taxpayer’s prior history.
• The existence of illegal income.
• The effect on the voluntary compliance of other taxpayers.
• The amount of effort needed in contrast to the potential resulting income to the IRS and
• “…any special circumstances existing in the case of a particular taxpayer…”

The IRS will evaluate collectability of tax as a factor as to whether to secure any unfiled tax returns, whatsoever. The IRS may contact third parties such as employers, banks, neighbors, family and friends to confirm income sources or to secure a current address of the taxpayer.

If securing a tax return is not practical or even possible, then the IRS may prepare substitute for return (SFR) based on available third party information reported to the IRS on forms W-2’s, 1099’s, 1099R’s and other payer reporting documents.

Generally speaking, an SFR will NOT take most advantageous tax positions for the taxpayer and will almost always result in a higher tax liability.