If you do not pay your outstanding tax liability it is not a crime. However, it is a crime if you do not file your tax return in the first place. Each unfiled tax return carries a potential one year sentence. Also, the collection statute on a given tax year does not begin until you file your return. It is always better to file an unfiled tax return and not pay the tax to begin running the statute of limitations on collections, eliminate potential criminal prosecution, and lessen the penalties involved with non-filing.
When a taxpayer does not file a return the Service will prepare one for you using all the information that they have on you and making estimates where necessary. This “Substitute for Return” (“SFR”) will not reflect any deductions you may have and will reflect your tax situation if the worst possible light. We can “correct” this filing that the IRS has made on your behalf by preparing and presenting the unfiled returns to the IRS for you. If you have any refunds due from unfiled returns it is important to get them filed quickly. If a refund is due on a return that is more than three years old, you lose the refund due to a statute of limitations that prohibits refunds on returns after three years. That is why it is always better to attack a tax problem early and not ignore it. The result will usually be better for the taxpayer and potential refunds will not be lost.
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