Frequently asked questions about unfiled tax returns

The IRS can file a return for you, called a substitute for return, or SFR. This return will include only your income and won’t allow you any deductions, credits, or preferred filing status. The SFR will also include a late-filing penalty. In serious situations, the IRS can pursue taxpayers for criminal prosecution.

If you are due a refund for withholding or estimated taxes, you must file your return to claim the refund within three years of the return due date, including extensions.

Yes, the IRS can freeze your refund and ask you to file if you have an unfiled return from a past year, especially if the IRS projects that you will owe taxes on that past return. The IRS will hold your refund for six months while it requests a filed return from you. If you don’t file the past-due return, the IRS can charge you, or assess, taxes from that past return through the Automated Substitute for Return (ASFR) program, and apply your refund to any balance due.

Yes. The willful failure to file a tax return is a misdemeanor and may be elevated to a felony if an overt act of evasion occurred. Late filing is a serious issue, especially if coupled with avoiding payment of any balance due. However, for most taxpayers who fail to file a tax return, the IRS assesses only civil penalties, and the IRS will generally give you multiple chances to file by sending notices.

There is no statute of limitations on an unfiled return. The IRS can go back to any year that you haven’t filed, and assess taxes and penalties. But in practice, the IRS generally does not go further back than the past six years to enforce filing. Also, the IRS completes most enforcement actions on back tax returns and SFRs within three to four years after the due date of the return.

If you miss the deadline on any IRS late-return notices (IRS notices CP59, CP515, and CP518), you should call the IRS to get your status and any special filing instructions/address to file the late return. You should also ask for an enforcement hold to allow for more time to file without IRS enforcement actions (SFR filing, collection enforcement, etc.).

Yes. When you haven't filed a past-due return after receiving IRS requests for you to file, the IRS can file a return for you. This is called a SFR. When you file a return to replace an SFR, it’s called “filing over an SFR,” or SFR reconsideration. If you are in this situation, you should contact the IRS to get instructions on where to send your late return. You should also request a collection hold on your account to allow the IRS time to process your return before another IRS division pursues collection activity on the taxes that resulted from your SFR.

The IRS commonly assesses failure-to-file and failure-to-pay penalties on late-filed returns with a balance due. If you don’t owe taxes on your late-filed return, you won’t face late-filing or -payment penalties. That’s unless the IRS assesses other taxes on your return, which could result from an audit or underreporter inquiry. If the IRS files a SFR for you, the SFR notice will always show the taxes you owe, along with late-filing and -payment penalties.

Yes, there are two common penalty relief requests for a late-filing penalty:

• First-time abatement (FTA) may be possible for you if you have a clean compliance record, meaning that you have had no penalties in the past three years, that you have filed all your required returns, and that you have paid all the taxes you owe or you’re in good standing within a collection agreement. If you meet those conditions, you can request relief from the failure-to-file and -pay penalties using FTA.
• Reasonable cause may be possible if you have experienced unforeseen circumstances outside of your control. You can request, in writing, that the IRS abate your penalties for reasonable cause.

No, payment is not required at that time. But once the IRS assesses the taxes, you will need to pay or arrange for a collection alternative, such as an extension to pay, a payment plan, hardship status, or an offer in compromise, on the outstanding balance.

Yes, most commercial tax software programs allow for taxpayers to prepare and file late returns.   However, most programs do not allow taxpayers to  electronically file (e-file) their own back returns. Be aware that tax rules change each year. Most taxpayers should consider getting assistance from a qualified tax professional who has knowledge of prior-year rules and late-filing procedures.

Yes- if you use a tax professional and the return is the current and/or the past two years.  However, most DIY software programs do not allow you to e-file a prior-year return. Note: The IRS closes e-file each year in mid-November and reopens it in January. During the e-file closure period, all returns must be filed by paper.

You can order these transcripts online to be mailed to your last address on record. You can also set up an IRS online account and use the “Get Transcript” tool to immediately get your transcripts. If these methods don’t work, you can call the IRS or visit a Taxpayer Assistance Center to get your transcripts.  The IRS will not fax transcripts.

One limitation for taxpayers is that the IRS generally provides “masked” transcripts. A masked transcript does not have much of the identifiable information needed to file a back return. The IRS will provide unmasked wage and income transcripts when needed for preparing and filing tax returns. Tax professionals can easily obtain the unmasked version of the transcript to help file the back return.

You should consider using a tax professional with an e-Services account, if you need to quickly get and interpret your IRS transcripts.

For individual returns (Forms 1040), the IRS usually applies the six-year rule, unless it suspects significant potential taxes owed in the years prior to the past six years. Most of the time, when the IRS deviates from the six-year rule, the delinquent-return investigation is usually assigned to a local IRS collection office (to a revenue officer).

IRS Policy Statement (5-133) doesn’t apply to business returns (employment tax returns Forms 940, 941, 944; income tax return Forms 1065, 1120, 1120S, and many other types of returns). 

• You can get information about your account, including transcripts, from the IRS individual accounts management hotline at (800) 829-1040.
• Business accounts should call (800) 829-4933.
• If your return delinquency is assigned to an SFR unit, you can call (866) 681-4271.

You should call early on these hotlines (8:00 a.m.) to avoid long wait times and IRS disconnects. In urgent situations, you should consider engaging and authorizing a qualified tax professional who has a special hotline to expedite answers and account information for taxpayers.