Some taxpayers have not filed tax returns for many years. When I am contacted by these taxpayers who now wish to comply with tax laws, I am asked how far back the taxpayer needs to go to file past due, unfiled tax returns. Often times, the longer the taxpayer must go back to prepare tax returns, the less the taxpayer may have access to records on income and expenses.
Another area of tax law where unfiled tax returns becomes important is when a taxpayer wishes to submit a request for installment agreement or offer in compromise to resolve delinquent tax. The taxpayer must be in compliance with tax filings in order to receive an approved installment agreement or offer in compromise. So the question becomes: if the taxpayer has years of unfiled taxes, how many years must the taxpayer file to be “in compliance”?
The answer general is: the six most recent years of unfiled tax returns must be filed. IRS Policy Statement 5-133 provides that IRS enforcement for unfiled returns “will result in enforcement of delinquency procedures for not more than six (6) years. Enforcement beyond such period will not be undertaken without prior managerial approval. Also, if delinquency procedures are not to be enforced for the full six year period of delinquency, prior managerial approval must be secured.”[1]
While it is possible that the IRS could insist upon more than the most recent six years for fraudulent or willful conduct, the standard at the IRS, for most cases, requires the filing of the most recent six years of tax returns.
Practice Point: For taxpayers with unfiled tax returns, the taxpayer should prepare tax returns for the past six tax years in order to come into compliance with IRS tax filing requirements.
Taxpayers with unfiled tax returns may contact Jared Le Fevre to discuss options for coming into compliance with federal tax filing requirements.
Jared M. Le Fevre is a tax attorney and partner in the Tax, Trusts and Estates Practice Group of Crowley Fleck PLLP. Mr. Le Fevre represents taxpayers before the IRS, IRS Independent Office of Appeals, Tax Court, Federal District Court and state tax agencies throughout Montana, Wyoming, North Dakota, Idaho, and Utah. Mr. Le Fevre is involved in federal and state and local tax audits, appeals, and tax resolution throughout these western states. Mr. Le Fevre also advises clients on the tax effects of business and real estate transactions.
[1] See also IRM 1.2.1.6.18.