How Long Can You Dodge the IRS? The Answer May Astound You…
By Steven A Leahy
Most of the taxpayers who come to see me have been playing hide-and-seek from the IRS for some time. They wonder “How long can I Dodge the IRS”? They hope the IRS will forget about them. I hear, “can I fly under their radar” a lot. The truth is – it may take some time before the IRS catches up with you. But in the end, they will find you. The IRS is like a battle ship: It may take a long time to turn on you and get you in their sites. But, once they do, the damage can be devastating.
The common scenario follows this pattern: The taxpayer owes the IRS on tax day, but doesn’t have the money to pay. The taxpayer gets VERY UPSET and SCARED. So, the taxpayer files an extension. The extension pushes the due date of the return to October 15th, typically. By filing an extension, the taxpayer feels a false sense of relief. It is false because, the taxpayer doesn’t recognize that they have already sustained a penalty for not paying any tax owed. That’s right – the extension, extends the time for filing the return, not for paying the tax. Next, as time goes by, the tax deadline gets lost in life, and goes by without notice.
The next time the taxpayer worries about their tax return is when the next tax year is upon them. The taxpayer has yet to file the previous year, and believes they have to file that year before filing the current year. So, you guessed it, as the April 15th deadline approaches, the taxpayer files another extension – Peace settles in until the next year. This is when the sleep starts to evade the taxpayer. They can bury the thought of their tax problem during the day. But, while laying in bed at night, their tax problem in all they can think of.
The IRS Has 3 Years to Audit
Did you know that the IRS has three years to audit a tax return. If you haven’t filed, they can’t audit the return. But they can file a return for you. When the IRS files a return for you, that is called a Substitute for Return, or SFR. The taxpayer may believe the IRS has forgotten about them, only to learn later (much later) that the IRS has filed the SFR and assessed a tax far in excess of what the taxpayer actually owes. So, often the IRS won’t even begin coming after you 5 years, or more, after the original return was due. This is what gives taxpayers’ with unfiled returns a feeling the IRS has forgotten them.
Now, not filing returns limits you options on resolving your IRS problem. For example, if you haven’t filed a tax return, the tax for that year will never be dischargeable in bankruptcy. That is true, even if the IRS filed an SFR for you. One more problem – if you file your tax return on time, the Collection Statute Expiration Date, or CSED, begins to tick right away.
If, however, the IRS files an SFR, the CSED begins on the date the tax is assessed, not on the date the tax was due. CSED is the time limit set on the IRS to collect a tax debt or file a complaint in court. Generally, CSED is ten years from the date of assessment. Although there are some events that may extend that date. If the IRS believes you are trying to avoid paying your taxes, they will simply file a complaint in court, obtain a judgment and seek to collect that judgment. There isn’t a time limit on collecting a judgment. That means the IRS may never go away until they are paid in full.
Dodging the IRS causes bigger problems down the line. Resolve your IRS problem today. So, if you have ANY IRS questions, Call me, Attorney Steven A. Leahy at 312-664-6649. I am the Chicago IRS Answer Man.