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Unfiled Tax Returns
Restore Filing Compliance Before Pursuing Any Resolution
The IRS will not consider any collection resolution — installment agreement, Offer in Compromise, or Currently Not Collectible status — until all required returns are filed. Filing compliance is the first step in every resolution case.
Substitute for Return (SFR) risk
If you do not file, the IRS may prepare a Substitute for Return using third-party information (W-2s, 1099s). An SFR uses the least favorable filing status and claims no deductions beyond the standard deduction. The resulting assessment is almost always higher than what you would owe on a properly prepared return.
Consequences of Unfiled Returns
Failure-to-File Penalty
5% of the unpaid tax per month, up to 25% of the unpaid tax. If both the failure-to-file and failure-to-pay penalties apply in the same month, the failure-to-file penalty is reduced by the failure-to-pay penalty amount.
No Statute of Limitations
The 3-year assessment statute and the 10-year collection statute do not begin to run until a return is filed. An unfiled return means the IRS can assess tax at any time.
Ineligibility for Resolution Programs
The IRS will not approve an installment agreement, Offer in Compromise, or Currently Not Collectible status until all required returns are filed.
Criminal Exposure
Willful failure to file is a misdemeanor under IRC §7203. Tax evasion is a felony under IRC §7201. Most delinquent filers are not criminally prosecuted, but the risk increases with the number of years unfiled and the amount of income involved.
Delinquent Return Services
- Individual income tax returns (Form 1040) — multiple years
- Business income tax returns (Form 1120, 1120-S, 1065)
- Payroll tax returns (Form 941, 940)
- Information returns (Form 1099, W-2)
- Substitute-for-Return corrections
- Estimated tax and federal tax deposit planning
- State delinquent returns — Arizona and Texas
How Many Years Do I Need to File?
The IRS generally requires the six most recent years of unfiled returns to establish compliance for resolution purposes. However, the IRS can assess tax for any unfiled year, so the appropriate number of years depends on your specific situation, the income involved, and whether the IRS has already filed Substitutes for Return.
Unfiled Returns Are the First Problem to Solve
No resolution strategy is available until all required returns are filed. We prepare delinquent returns and establish compliance as the foundation of every resolution case.
No resolution strategy is recommended until we have reviewed your transcripts and financial position. Eligibility depends on your specific facts.