Tax season arrives each year, though not everyone is ready for it. Failing to submit your yearly return might seem like the least stressful plan at the moment, but could result in even more financial hardship later on. 

And although many still believe that the IRS can’t collect on back taxes past a certain point, this isn’t actually the case. In fact, they can (and will!) collect on your unfiled tax debt eventually.

Stay prepared for IRS collection by learning more about how unfiled tax rules work and what happens if you don’t file on time. Then, get help from Denver tax preparation services so your tax season stays stress-free.

IRS rules for unfiled taxes

One common belief of IRS unfiled tax collection is that you’ll have up to ten years before the IRS takes action. There is a small loophole, however, that many are not aware of. Although the IRS can only collect on tax debts that are younger than ten years, that “timer” doesn’t begin right after you miss your filing date. In fact, it only starts after the IRS starts looking into your missed returns, they submit a substitute return on your behalf, or you file a past due return.

It’s essential to begin catching up on missed filing right away, too. Once the IRS starts the collections process, you’ll only have a limited time to file or pay any unpaid dues. Not doing so can put you at an even higher risk of civil or criminal penalties. 

What happens if you don’t file your taxes

There can be some serious backlash from the federal government when it comes to unpaid dues. They will, however, give you a few warnings in the form of notices and demands for payment. This gives you around ten days to initially respond to the IRS for your unfiled accounts.

If you ignore these initial notices, you’ll then receive a final notice from the IRS giving you thirty days to respond. During this time, you can request a hearing in order to challenge the amount owed or waive your right to a hearing and pay the amount due.

The IRS can take further legal action if this final notice isn’t adhered to. They have the ability to pursue paying off your tax debt through other means like:

  • Levying your assets like real estate or home mortgage
  • Garnishing salary and wages
  • Seizing savings accounts, retirement funds, and life insurance policies
  • Claiming investment dividends 
  • Seizing belongings like your car, boat, RV, or jewelry

What to do if you owe

Although the IRS statute of limitations for tax debt collection is virtually unlimited, there’s plenty you can do before it gets out of hand. Consider the help of a Denver tax preparation service to help you sort through your tax issues and develop a tax plan. This can help you feel prepared when filing so that you know exactly what you owe and aren’t late on your filing and dues. 
Contact Denver Tax Advisor for more information on how we can help.