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IRS procedure and Taxpayer's solution to Non-Filed Tax Returns

A lot of taxpayers chose not to file their income tax return simply because they couldn’t afford to pay off tax liabilities despite knowing the potential criminal penalty from such violation of the Federal Tax Law. However, what most taxpayers failed to understand is:

  1. Federal tax law only requires taxpayers to file their income tax return to avoid any criminal related penalties.
  1. When tax liability occurs, and taxpayer can’t afford to pay; the federal tax law only requires taxpayer to work with the IRS for an alternative solution. Our federal tax law requires the IRS to provide different alternative options to help taxpayer settle their tax debt based on their financial situation.
  1. Several Appeal options are available for taxpayers who couldn’t reach a reasonable solution with the IRS.    
  1. Failure to file a tax return that carries a tax liability will result in additional penalties compare to taxpayers who filed the return but can’t afford to pay their taxes.  

Per federal tax law, if any non-filing case determined by the IRS to be a case of willful neglect, the responsible taxpayer could be facing serious criminal tax charges. Generally, Non-filing of any tax return does NOT fall into the category of willful neglect.

When a tax return became past due, the IRS will attempt to secure a valid voluntary tax return from taxpayer by sending written notices via USPS mail. Please note, IRS absolutely will NOT contact you via telephone to secure a non-filed tax return.

If taxpayer doesn’t respond to the notice, IRS will route the case to the examination department for an assessment. Examiners will file a return on behalf of taxpayer. Such returns filed by the examiners are called “Substitute for return (SFR)”. During this assessment process, the examiner is required to determine whether any indications of fraud exist.

Generally, the enforcement period of any non-filed tax return is not to be more than Six years with the following exceptions:

  1. The taxpayer’s prior history of noncompliance.
  2. The existence of income from illegal sources.
  3. The effect upon voluntary compliance.
  4. The anticipated revenue in relation to the time and effort, required to determine tax due.
  5. Any special circumstances existing in the case of a taxpayer, class of taxpayer, or industry, or which may be peculiar to the class of tax involved.

In case of any assessment beyond the 6 years limitation, Manager approval will be required.

Unlike the statue limitation of return filing, the collection statue is 10 years from the filing day of the return. A Substitution filed by the examiner doesn’t trigger the running of the 10-year statue. In other words, The IRS could collect any assessments made by an SFR return indefinitely.  

A SFR return generally carries maximum amount of tax liability. The IRS will not assist you to claim any credits and deductions through an SFR return. Therefore, most of the assessment made by an examiner will be significantly higher than what taxpayers owe.

Taxpayers also need to keep in mind that, IRS generally doesn’t assess non-filed tax returns until few years down to road. Non-filing of tax returns is a very common problem among US taxpayers. My practice receives cases that has several years of non-filed returns on a monthly basis. Regardless of how many years it has been since the non-filed tax years, we guarantee to resolve any non-filing problems. We could appeal any assessments that were assessed unfairly. If you are currently suffering from any tax problems related to non-filing of tax returns, give my office a call and let us resolve the problems for you.


  1. Internal Revenue Manual - Part 4, chapter 12 section 1


Tax Due Dates