Taxation & Estate Planning

In most cases, the IRS will require the past six years of unfiled tax returns for an account to be considered current.  This is a written directive of the IRS, found in IRS Policy Statement 5-133, “Delinquent Returns - Enforcement of Filing Requirements”.  

If the unfiled returns have a balance due, the amount you owe will double every five years from the interest and penalties charged by the IRS (more about the time limitations to collect here.  Since IRS billing notices will start after the returns are filed, an early financial analysis is always recommended to determine the collection approach (offer in compromise? bankruptcy? installment agreement?).  You will receive refunds, but only for returns that were to be filed within the last three years.  

Exceptions to the six year rule may apply in cases involving a prior history of noncompliance, false statements, existence of income from illegal sources, or the class or industry the taxpayer is in (a physician with advanced education may be held to a higher standards of awareness).  These cases could involve criminal elements and must be handled very delicately, although the vast majority of nonfiling cases are civil matters, not criminal.