We have many taxpayers walk into our offices that have not filed back tax returns for years and years. The question is always this,
“How many years should be filed if a taxpayer has not filed in years?”
That answer will vary from practitioner to practitioner and most tax preparers are afraid to answer the question but out of the IRS IRM comes the answer and how the IRS wants the Agents to deal with the tax problem of not filed tax returns.
Below is the Internal Revenue Manual on the subject.
This section discusses the procedures involved in handling non-filed returns per IRM
Substitute for return (SFR) and delinquent tax return procedures were developed to deal with taxpayers who do not file required back tax returns for the IRS.
The purpose of the procedures is to assess the correct tax liability by either:
a. Securing a valid voluntary tax return from the taxpayer (delinquent return), or
b. If securing a return is not possible, computing tax, interest, and penalties based upon information submitted by payers, or based on other available information (SFR).
Source of Cases for the agent
IRS, Tax Examiners and Revenue Officers encounter non-filers in several ways.
1. From related cases/spin-off examinations
2. As project cases
3. As referrals from other functions
Policy Statement 5-133 (P-5-133), IRM 22.214.171.124.18,
Delinquent returns—enforcement of filing requirements, discusses delinquent returns and the enforcement filing requirements.
The enforcement period is not to be more than six years.
However, the extent to which delinquency procedures will be enforced will depend upon the facts and circumstances of each case, and by reference to factors ensuring evenhanded administration of staffing and other Service resources. Enforcement for longer or shorter periods may be used when consideration has been given to:
1. The taxpayer’s prior history of noncompliance.
2. The existence of income from illegal sources.
3. The effect upon voluntary compliance.
The anticipated revenue in relation to the time and effort, required to determine tax due. Any special circumstances existing in the case of a particular taxpayer, class of taxpayer, or industry, or which may be peculiar to the class of tax involved.
IRS does have the ability on special cases to extend the period to file more back or unfiled tax returns. If a taxpayer is loaded with assets and have not filed multiple tax returns the IRS can and will go back more, but special circumstance must exist.
However, as a very general rule, 6 years of back filing is very safe.
Call us and we can review your case. 1-866-700-1040
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