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  • Daniel Rodriguez

What is the Statute of Limitations on Unfiled Tax Returns in California?

If you have unfiled tax returns, it is wise to file them as soon as possible. Filing a late tax return can not only result in losing out on a refund, but the Internal Revenue Service (IRS) may choose to pursue you for money owed on unpaid taxes. Under serious circumstances, the IRS may consider referring your case to the Justice Department for prosecution. If you are concerned about the tax implications of your unfiled returns, you should consult with an experienced Roseville tax return attorney today. The NewPoint Law Group, LLP can help you manage your tax liability if you have one or more unfiled tax returns. Our firm is here to explain the statute of limitations on unfiled tax returns.

How Does the Statute of Limitations Work for Unfiled Tax Returns?

The statute of limitations is a law that dictates the amount of time that a particular legal action must be carried out. For example, if you fail to file your taxes for several years, at some point, you will be ineligible to claim certain tax refunds. The purpose of the statute of limitations is to encourage a taxpayer or other type of legal plaintiff to take action within a reasonable amount of time.

The statute of limitations permits a taxpayer to claim a refund for unfiled tax returns for three years after the original filing date. If the taxpayer does not file within this timeframe, the IRS will bar a taxpayer from receiving a refund check, applying for any tax credits, and even overpayments of taxes.

It is also important to note that the statute of limitations applies to the ability of the IRS to pursue prosecution against a taxpayer that failed to file taxes. If you fail to file your taxes, the IRS typically has six years to commence a criminal action against you. The deadline begins to run on the date that you failed to file your taxes. If you have multiple unfiled tax returns, this could make you prone to prosecution for several years.

There is also a possibility that the statute of limitations for prosecution of unfiled taxes can be tolled. This means that the timeframe to prosecute a taxpayer will be paused due to certain circumstances. For example, if a taxpayer fled the country to avoid their unfiled taxes or if they were simply outside of the country, this could toll the statute of limitations. The prosecution deadline may also be increased depending on changes in the law or the frequency of tax evasion.

Fortunately, the IRS would prefer to collect the back taxes owed by taxpayers before immediately turning to prosecution. That is why it is important to keep in contact with the IRS if you need assistance managing your tax liability.

To learn more about the penalties for unfiled tax returns, you should continue reading and speak with an experienced California tax attorney today.

Tax Penalties for Unfiled Returns

There are several consequences and tax penalties that a delinquent taxpayer can be subject to for failing to file their returns. For example, if you want to purchase a new home or file an application for a loan, financial institutions require proof of your tax liabilities. Submitting a tax return from several years ago or being unable to provide one at all will ensure that these institutions will avoid doing business with you.

Additionally, the IRS can file a substitute return for taxpayers that failed to file their taxes on time. A substitute return is when the IRS files your taxes for you but neglect to utilize any deductions, exemptions, or tax credits that you may have earned. While it may seem like the IRS is doing your work for you, a substitute return will come with heavy tax penalties.

Before the IRS files a substitute return, they will notify you with a “Notice of Deficiency.” This notice explains that you have 90 days to file your tax return or enter a petition to explain why you cannot file a return. You should answer this notice as soon as possible to avoid a substitute return.

As mentioned, the IRS would prefer to collect back taxes before they pursue criminal action. The IRS has a number of ways to collect taxes that are owed. One of these ways is to issue a federal tax lien on a taxpayer’s property. If the taxpayer continues to ignore the IRS, the IRS can levy the property in question. It is even possible for the IRS to place a lien on property owned by a business, which can have several effects on your financial relationships.

If you cannot afford to pay your taxes, it is wise to open dialogue with the IRS before they begin the collection process. They will work with you to draft a plan to manage your tax liability. Under certain circumstances, you may even be able to secure a tax penalty abatement.

Our Folsom Tax Return Planning Lawyers are Ready to Work with You

If you need assistance handling your unfiled tax returns, you should contact an experienced Folsom unfiled tax return lawyer. The legal team at the NewPoint Law Group, LLP have decades of combined legal experience handling a wide range of tax law issues, and we are prepared to represent you. To schedule a confidential legal consultation to discuss your tax liability, contact the NewPoint Law Group, LLP at 800-358-0305, or contact us online.

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