Unfiled Tax Returns

Failing to file tax returns in the U.S. can lead to serious consequences from the Internal Revenue Service (IRS), even if you owe nothing. The penalty for not filing is 5% of the tax due per month, up to 25%, plus interest and late payment penalties (0.5% per month).

If you don’t file, the IRS can prepare a Substitute for Return (SFR) using income data it has, but this version ignores deductions and credits, usually resulting in a much higher tax bill.

Once assessed, the IRS can:

• Garnishee wages
• Levy bank accounts
• File tax liens against your property

In rare cases, willful failure to file can be prosecuted criminally, with up to 1 year in jail per unfiled return.

The longer you wait, the worse it gets, but there are options:

• File now to reduce penalties and stop enforcement.
• If you can’t pay, the IRS Fresh Start Program offers payment plans or settlements.
• If criminal exposure is possible, the Voluntary Disclosure Practice may protect you.

For help with unfiled U.S. tax returns, contact our experienced team of tax attorneys at taxlawyer.com.

If you don’t file your tax returns in Canada, the Canada Revenue Agency (CRA) doesn’t wait forever, they can estimate your tax bill and issue an arbitrary assessment based on income slips or past returns. These estimates often exclude deductions or credits, meaning you’ll likely owe more than necessary.

Consequences include:

• Penalties & Interest: 5% of your balance owing, plus 1% per month (up to 12 months). Repeat offences may double the penalty.
• CRA Enforcement: CRA can garnishee wages, freeze accounts, or seize assets—all without going to court.
• Benefit Disruption: You could lose the Canada Child Benefit, GST/HST credits, and refunds until you file.
• Legal Risks: Repeated non-filing can lead to criminal prosecution in extreme cases.

You cannot dispute a CRA estimate without filing the missing tax return. Filing your actual tax return is the only way to correct an arbitrary assessment.

Pro Tax Tip: If the CRA hasn’t contacted you yet, the Voluntary Disclosures Program (VDP) may help you avoid penalties and prosecution and reduce interest owing.

Yes — not filing taxes can be a crime in both the U.S. and Canada, but the context matters.

In the United States:

• Failure to file a tax return is a misdemeanor under the Internal Revenue Code (IRC §7203). The penalty is Up to 1 year in prison per unfiled return, plus fines.
• The IRS must prove the failure was willful — meaning intentional, not accidental.
• Criminal charges are rare, but more likely if; multiple years are unfiled, large amounts of tax are owing, and if there’s evidence of deliberate evasion (e.g., hiding income)

In Canada:

• Under the Income Tax Act, failure to file can lead to a summary conviction offence. The penalty is up to $25,000 in fines and/or 12 months in jail.
• As in the U.S., prosecution is rare and usually reserved for repeat or egregious offenders.
• Tax evasion (e.g., deliberately lying on returns) is more serious and can lead to longer jail terms and higher fines.

Pro Tax Tip: While most people with unfiled taxes face penalties and interest, persistent or deliberate non-filing can become criminal. If you’re at risk, seeking legal tax advice early is key.

Need help? Visit taxlawyer.com.

Filing past-due returns in both Canada and the U.S. is generally similar to filing on time, but you’ll be dealing with prior years.

Here’s what you should do:

United States:

• Gather income documents (W-2s, 1099s, bank records, etc.).
• Request wage and income transcripts from the IRS to see what they have on file.
• Prepare each year’s return separately using tax software or a tax professional.
• Submit the returns by mail (e-file is only available for the current and previous two years).
• If the IRS filed a Substitute for Return (SFR), your filed return will generally replace it.
• Consider the IRS Fresh Start Program if you owe and can’t pay in full.
• For potential criminal exposure, use the IRS Voluntary Disclosure Practice.

Canada:

• Collect your T-slips and other income/deduction records for each year.
• Access your CRA “My Account” to view slips the CRA already has.
• Prepare and file each return using certified software or a tax professional.
• If CRA has issued an arbitrary assessment, filing the actual return will usually override it.
• If you haven’t been contacted yet, apply through the Voluntary Disclosures Program (VDP) to avoid penalties.

It’s a good idea to file these as soon as possible to minimize penalties and interest. For help filing back taxes properly and minimizing penalties, contact us at taxlawyer.com.

There’s no statute of limitations on unfiled U.S. tax returns, the IRS can demand them at any time, even decades later. The standard 3-year tax audit limit only begins after a return is filed.

If you don’t file your missing tax returns, the IRS can:

• File a Substitute for Return (SFR) using income data they have
• Assess taxes without credits or deductions
• Begin enforcement actions such as levies, liens, or wage garnishees

To become tax compliant, the IRS typically requires you to file the last 6 years of tax returns, but more may be needed in serious cases. If you’re worried about penalties or criminal exposure, you may qualify for the IRS Voluntary Disclosure Practice or you can explore other IRS programs.

There’s no time limit, the CRA can demand unfiled tax returns from any year, no matter how old. The standard 3-year reassessment window only starts once a tax return is filed.

If you don’t file your missing tax returns, the CRA can:

• Issue an arbitrary assessment based on estimates
• Enforce collections through wage garnishees, bank freezes, or asset seizures

If you come forward voluntarily, the Voluntary Disclosures Program (VDP) may allow you to avoid penalties and prosecution. CRA usually requires at least the last 10 years of returns under VDP.

If you file late but don’t owe any tax, the consequences are usually minimal, no late-filing penalty applies.

However, here’s what to keep in mind:

• No penalty if no balance is due: Both the IRS and CRA only charge late-filing penalties when tax is owed.
• You might lose your refund:
  • IRS: You must claim your refund within 3 years of the original due date, or you forfeit it.
  • CRA: There’s no hard deadline, but after 3 years, refunds may be denied at CRA’s discretion.
• Benefit delays: Filing late can delay or interrupt benefits such as the Canada Child Benefit, GST/HST credit (CRA) or certain refundable credits (IRS).
• Missed filings can raise red flags: Even with no balance owing, repeated late filing may increase tax audit risk or trigger compliance notices.

Pro Tax Tip: No tax due = no penalty, but delays can still cost you.

More info at taxlawyer.com.

• In the U.S.: The penalty for filing late is generally 5% of the unpaid taxes for each month or part of a month that a tax return is late, up to a maximum of 25% of your unpaid taxes. If the return is more than 60 days late, the minimum penalty is either $485 (for returns due in 2024) or 100% of the tax owed, whichever is less. Interest is also charged on the unpaid balance from the due date of the tax return until it’s paid. If you’re due a refund – no penalty, but you must file within 3 years to claim it.
• In Canada: The penalty for filing your tax return late is based on how late you file and how much you owe. For 2024, the penalty is 5% of your balance owing, plus an additional 1% for each full month that you file after the due date, to a maximum of 12 months. If you were charged a late-filing penalty for any of the three previous years, the penalty jumps to 10% + 2% per month, up to 20 months. If no tax is owing – no penalty, but delays may affect benefits or refunds.

Pro Tax Tip: Filing your tax return – even late – is better than not filing at all. To reduce or eliminate penalties, consider programs like the IRS Fresh Start or CRA’s Voluntary Disclosures Program.

Yes, there is a statute of limitations on how long the tax authorities have to assess (calculate and send you a bill for) additional taxes after you file your return. However, there is no statute of limitations for unfiled acts returns in either Canada or the U.S.

• U.S.: The IRS generally has 3 years from the date you filed your return (or the due date, whichever is later) to assess additional tax. This period can be extended to 6 years if you underreport your gross income by more than 25%. There’s no limit in cases of fraud or unfiled tax returns. However, tax refund claims must be filed within 3 years or you lose the refund.
• Canada: Generally, the CRA has 3 years from the date of your Notice of Assessment to reassess your tax return. This can be extended in certain circumstances, such as if you’ve made a misrepresentation or committed fraud.

Pro Tax Tip: Filing starts the clock. If you never file, the tax authority can go back indefinitely.
Need help? Send us a message today at taxlawyer.com.

The best way to minimize penalties is to file your unfiled tax returns as soon as possible. This demonstrates your willingness to correct the situation and can lead to reduced penalties.

Additionally, consider these steps:

United States (IRS):

• File immediately, even if you can’t pay, as this stops the 5% monthly late-filing penalty.
• Request a payment plan or explore the IRS Fresh Start Program if you owe money.
• Apply through the Voluntary Disclosure Practice if your non-filing was willful or spans multiple years.
• Consider hiring a tax professional to navigate complex filings and reduce risk.
• File within 3 years to claim any refund, no penalty applies if you’re owed money.

Canada (CRA):

• File as soon as possible – penalties increase with time.
• Use the Voluntary Disclosures Program (VDP) to avoid penalties if the CRA hasn’t contacted you yet.
• CRA typically requires the last 10 years of tax returns under VDP.
• Work with a tax professional to file correctly and maximize relief.
• Set up a payment plan if you owe taxes and can’t pay in full.

Acting before the tax authority contacts you can save you thousands in penalties and interest.
For help getting compliant, reach out to us today at taxlawyer.com.

At taxlawyer.com, we help individuals and businesses across the U.S. and Canada resolve unfiled tax returns quickly and discreetly. Whether you’re years behind or just missed a recent deadline, our team can prepare and file your overdue returns, negotiate with the IRS or CRA, and apply for relief programs like the IRS Fresh Start or CRA’s Voluntary Disclosures Program.

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No matter where you’re located, our highly-skilled tax professionals are ready to help you become tax compliant and protect your finances. Start now at taxlawyer.com.