Unfiled Tax Returns

Many taxpayers fail to file required tax returns for all types of reasons. However, you should understand that failing to file can be treated by the IRS as a criminal offences, punishable by up to one year in jail for each unfiled return. Needless to say, owing the IRS money is serious—but risking your freedom for not filing is far more severe. 

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The IRS may file a return for you and treat it as if your filed it yourself. However, this "substitute" return is prepared in the best interest of the government, not yours. As a result, the IRS typically allows only the standard deduction and a single personal exemption. You will not receive credit for the deductions you may be entitled to, such as exemptions for a spouse or child, mortgage interest, property taxes, investment losses, the money paid for stock, or business expenses. Even Worse, if you were entitled to a refund, you may lose it permanently. 

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Regardless of what you may have heard, you have the right to file your original tax return, no matter how late it is. The IRS may not initially accept it, but with proper negotiation, they will process it and correct return. That can reduce penalties and interest, too. The CPA's of Kenneth D. Eichner, P.C. regularly prepares prior-year tax returns that were not filed, even when the IRS has prepared a substituted return.