Not filing a tax return when you actually owe taxes is far worst than filing a tax return and not being able to pay the tax amount owed. If you file a tax return but cannot pay, the IRS has tax solutions to help you pay the tax amount owed. If you do not file a tax return it is considered a crime and you can be punished for it. So even if you do not have a penny to your name, it is still a great idea to file the return. Not filing a tax return can result in fine up to a $25,000 and a 1 year prison sentence for each unfiled tax year. Typically, the IRS won't send people to jail for unfiled returns because if they actually sent every person to jail that had an unfiled return, they would only be able to fit about 1% of those people in the jails. When they do send people to jail it is mainly to set an example and to scare people into filing their returns, such as Wesley Snipes.

Will the IRS Find You?

Years ago it was likely that individuals could get away with not filing. The IRS still remains very inefficient, but they continue to update their computer systems every year to increase the efficiency in order to collect as much money as they can. The computer systems are good enough now that individuals cannot hope the IRS just doesn't realize they didn't file, cause that most likely will not be the case. The IRS inefficiency is shown by the slow response time to non-filers. Many non-filers think that they got away with not filing because they are not contacted within a year or two, but this is pretty normal, the time lag is usally about 1-2 years before they start making contact for the unfiled return. Don't forget that penalties and interest during the 1-2 years builds up.

The IRS has a computer system called Information Returns Program (IRP). The IRP matches W-2 wage statements and 1099 income reports from the payers (employers). They match this information against the tax returns that people file. When the computer fails to find a return to match with the 1099 report this will make the computer automatically start a Taxpayer Delinquency Investigation. The computer we begin submitting computer generated notices to your last known address and if no response is made then an IRS employee will begin trying to make contact.

When the IRS Finds You

The IRS will begin by contacting you in one of a few ways. Depending on how they contact you can tell you how serious the IRS is taking your case. You can either be targeted as a criminal non filer or a non criminal non filer.

When you are not being considered a criminal non-filer, the IRS will contact you by letter or telephone requesting that you file unfiled returns within a 30 day period of their request. You may also be visited by an IRS agent, that will request that you file the returns directly with him as soon as your can. The IRS can also file the returns for you, which they can legally do and they WILL NOT give you the benefit of the doubt on anything (deductions). If you are visited by a criminal investigator, the IRS has started up a criminal investigation for your unfiled taxes. This is not common and is likely to happen only if you did not report several hundred thousand dollars of income over a period of a few years. Next to recover the taxes once you file or they file for you, you could be levied or have property or money seized (e.g. bank levy, wage levy, personal property levy etc.)

How to File Unfiled Tax Returns
Gather the appropriate documents needed to file old tax returns. File before the IRS finds out you did not file. Voluntary filing is always the best.

Complete Unfiled Returns on Your Own
Collect old tax information and old tax forms to file with the IRS and/or state.

File Back Taxes
What steps need to be followed when attempting to file back taxes or unfiled tax returns. Great guidelines.

Tax Professional
A tax professional can be your best option for filing multiple years. They can minimize any actions the IRS will take against you by voluntarily filing on your behalf.