Delinquent Tax Returns
If you haven’t filed a tax return for one year, or multiple years, then you have a delinquent unfiled tax return(s). After a period of time, the IRS will prepare a substitute return for you, but it’s not in your best interest to have this return filed by the IRS, as they will use the highest tax rate applicable when they prepare your unfiled tax return for you, and assess penalties and interest on the liability filed by them, not you. If the Internal Revenue Service has not yet notified you, they will sooner or later. In rare circumstances, the IRS may also seek to impose a criminal offense for failure to file tax returns as required, especially if you are a “Tax Protester”.
Failure to file returns is illegal and a FELONY, and subject to criminal and civil penalties. Willful failure to file returns can result in a punishment of one year in jail and a $25,000 fine ($100,000 in the case of a corporation).
Delinquent tax returns should be filed immediately, even if you cannot afford to pay the taxes owed. In most cases, just by filing them you will dramatically reduce the liability if you are self-employed, itemize your deductions, are married, and/or have dependents. While filing delinquent returns without paying will cause interest and penalties to begin accruing, failure to file on-time dramatically increases these penalties. (A return is delinquent if you have not filed it by the due date and did not receive an approval for a filing extension.) These combined penalties can be as high as 25 percent of the taxes owed!
Just because the IRS has not contacted you does not mean they have missed your failure to file. Eventually, the IRS will calculate the tax you owe on their own, using the highest tax rate allowable. Filing delinquent tax returns forces the IRS to use your actual information in calculating your tax debt, and purging the return they filed for you.