IRS Law Blog

Not filing tax returns can be habit forming.

With the best intentions, you miss filing one year’s return.  That grows into another year, and then another.

Fears mount, procrastination feeds itself, and one missed filing turns into more years than you can keep track of.

Getting motivated to get back into the system is seemingly impossible.

Not filing tax returns can cost you money.

Maybe you were employed for wages, with taxes deducted from your paycheck and paid to the IRS every year.

Or you are self-employed, but sent the IRS estimated tax payments to cover your earnings.

Either way, if you have not filed, but have paid money to the IRS, it is possible that your tax returns would have refunds.

The IRS is not going to knock on your door with a check, announcing ¨You did not file.  We owe you money.  Here it is!¨

The only way the IRS is going to pay you back is if you file the returns.

The IRS will only pay refunds for the last three years’ tax returns.

Anything older than that, they keep.

This is not an IRS rule; it is law.  Internal Revenue Code Section 6511 directs the IRS to only pay refunds for returns filed in the last three years.  IRS is simply following the law.

Bottom line:  The IRS is holding your money.  And you need to get it back.  And the sooner you act, the more you will get.

There is another bonus to getting your refund returns filed ASAP:  If the IRS owes you money, they will not charge you any penalties for not filing on time.  Your record will be clear.

The risk of waiting is that the IRS will not be patient, and file an estimated tax return against you.  The IRS calls this a Substitute for Return, which is often referred to as a SFR.  The IRS is permitted to file a substitute return under Internal Revenue Code Section 6020(b).

Chances are that if the IRS files a substitute for return for you, they will get your taxes wrong.  The IRS will guess what your taxes should be, and will get your filing status wrong, not give you credit for dependents, and not allow any deductions.

Most IRS substitute for returns result in your taxes being too high.

In fact, an IRS estimated filing can result in you owing them money when they should be paying you a refund.

If the IRS has already filed an estimated return against you, it is not too late to set the record straight.  IRS will still accept your original returns, clear the balance they think you owe, and pay your refunds for the last three years.

Either way, you benefit by getting your refund returns filed.

Here are the steps to take to get out of your filing rut and get your money back:

• Secure all your income reporting papers from the IRS.  This includes your W2s and 1099s, everything that the IRS has about you.  We want to make sure that your returns match IRS records, and that you get full credit for your withholding and payments.

• Find out if the IRS has made any moves against you on their own.  If the IRS has filed a substitute for return, they will tell us about it.  We will also be able to get information about the SFR so we can correct it.  After all, you should only pay the IRS what you owe, if anything.

• Gather any tax papers you have kept.  If you are missing any records, we will be able to fill in the blanks with what the IRS has provided.

• Claim your tax deductions down.  This includes dependents, exemptions, and deductions.  Deductions can include mortgage interest paid on your house, real estate taxes, charitable contributions, medical expenses, student loan payments, and expenses from operating your business.  All of these deductions lower your taxes, and increase your refunds.

• Prepare the returns, get them filed with the IRS, and monitor IRS processing and letters.  We want to file each return with proof of mailing to the IRS, with a separate envelope for each.  It can take the IRS several months to process each return.  We monitor IRS action on the returns.  After completing the processing of your returns, the IRS send us letters confirming.  We then want to make sure the IRS letters agree with your returns.

All background calls to the IRS are made in a low key manner to not wake them up.  No calls are made agents overseeing IRS non-filing programs. Instead, the IRS has a separate information line for attorneys to gather records for their clients.

If you have unfiled returns but have paid your taxes, waiting can be costly.  The IRS pays refunds for only the last three years, so the sooner you file, the more you can get back.  Waiting can also make it worse, with the IRS growing impatient and taking matters into their own hands and filing estimated tax returns for you.  The good news is your taxes can be set straight, with the returns prepared and filed.  Refunds should belong to you, not the IRS.