What Happens If I Fail to File Tax Return?

There are many reasons one may fail to file a tax return on time. According to the IRS Code, if you willfully fail to file tax returns you commit a crime. You could be at risk of criminal prosecution and your livelihood could be jeopardized.

At Norman Spencer Law Group, we have a nationwide team of federal defense attorneys skilled at representing clients in IRS matters as well as other professionals such as forensic accountants, former IRS agents, and certified fraud accountants.

Failure to file tax returns is one of the most commonly prosecuted tax offenses in the United States. Each year that you fail to file a return is charged as a separate count.

Under 26 U.S.C. Section 7203 of the Internal Revenue Code it is a crime to willfully fail to do any of the following:

  • pay any tax or estimated tax;
  • make a tax return;
  • keep any records;
  • supply any information.

What Is The Statute Of Limitations For Failing To File a Tax Return?

The statute of limitations for failing to file a tax return under Section 7203 is six years, beginning with the statutory due date of the return. If you have an extension of time to file, the limitations period runs from the date on which the return was due.

What Should The Government Prove?

There are three elements prosecutors must prove to convict someone for a failure to file an offense.

  • the taxpayer was required to file a return
  • the taxpayer failed to file a return at the required time, and
  • the failure was willful

If the government can prove these three elements, it does not matter if you actually owe any money in taxes. Generally, the IRS does not refer cases for criminal prosecution under this law unless there is an average yearly additional tax of $2,500 or more. However, if the government does decide to prosecute the taxpayer for tax evasion, they will definitely add the charge of failure to file a tax return.

When Am I Required to File Tax Return?

You don’t have to file a tax return unless you have certain minimum amounts of gross income. So, if your defense is that you had no income and therefore did not file tax returns, the government will have the duty to prove that your gross income for the time period in question obligated you to file. In most cases, it’s not that difficult to do. It is different from tax evasion cases, where the government has the burden to show a tax due and owing because tax evasion is based on taxable income.

What Is Gross Income?

Many business operators who run their unincorporated businesses think that gross income is always the same as gross receipts. If your business is not incorporated, gross income is determined by gross receipts minus legitimate business expenses such as the cost of goods sold. If your business is a corporation, it is different because a corporation is always required to file an income tax return whether or not it generates income.

Failure to File Return On Time

You may be in violation of federal law if you do not file your tax return on time. This can happen for various reasons. At Norman Spencer Law Group we have helped numerous individuals avoid criminal prosecution after they have failed to file their tax returns.

The best solution in this situation is to be proactive. In most cases, the IRS will not prosecute taxpayers who come forward and voluntarily file past tax returns. You will be responsible for the back taxes plus, but we will help you make arrangements to pay it back to the IRS.

There are many benefits to be proactive if you are a non-filer. For example, if you have a professional license that you depend on in your business, such as a medical license, for example, you need to be cognizant of the collateral consequences of failure to file a tax return and being caught by the IRS. There is a high chance that if you are prosecuted, your license will be in jeopardy.

When we represent clients who failed to file tax returns, we need to act quickly to work on preparing their tax returns. This really needs to be done as soon as possible, which sometimes requires taking back steps, especially when our client is a business. The problem is that if you are caught before you file your returns, the IRS will prepare the estimated tax liability based on their understanding of your business and past returns. It is highly unlikely that you would receive any credit for legitimate business-related deductions or any other tax benefit you would receive had you had your taxes prepared by a CPA. Once the IRS decides what your tax liability should be based on their very approximate estimate, it is an uphill battle to convince them to reduce the numbers.

Why Norman Spencer Law Group Is Your Best Choice

Our firm has years of successful experience representing clients before the IRS and hundreds of tax matters under our belt. We are not only legal professionals but also a team of forensic accountants, former IRS agents, and certified fraud examiners. We are not a large firm, which means you will work directly with an attorney assigned to your case and you can expect to receive the best 1:1 service from us. Call us today to speak with a tax lawyer about your case.