24/7 call for a free consultation 212-300-5196

AS SEEN ON

EXPERIENCEDTop Rated

YOU MAY HAVE SEEN TODD SPODEK ON THE NETFLIX SHOW
INVENTING ANNA

When you’re facing a federal issue, you need an attorney whose going to be available 24/7 to help you get the results and outcome you need. The value of working with the Spodek Law Group is that we treat each and every client like a member of our family.

Client Testimonials

5

THE BEST LAWYER ANYONE COULD ASK FOR.

The BEST LAWYER ANYONE COULD ASK FOR!!! Todd changed our lives! He’s not JUST a lawyer representing us for a case. Todd and his office have become Family. When we entered his office in August of 2022, we entered with such anxiety, uncertainty, and so much stress. Honestly we were very lost. My husband and I felt alone. How could a lawyer who didn’t know us, know our family, know our background represents us, When this could change our lives for the next 5-7years that my husband was facing in Federal jail. By the time our free consultation was over with Todd, we left his office at ease. All our questions were answered and we had a sense of relief.

schedule a consultation

Blog

How to Handle an IRS Audit for Unfiled Tax Returns

March 21, 2024 Uncategorized

How to Handle an IRS Audit for Unfiled Tax Returns

Getting that letter from the IRS saying you’re being audited for unfiled tax returns can be scary. I know, I’ve been there. But try not to panic – with the right preparation, you can get through it. This article will walk you through what to expect and how to handle an IRS audit for unfiled returns. I’ll share what I learned from my own experience so you can be ready.

Why You Might Get Audited for Unfiled Returns

First, know that it’s pretty rare to actually get audited – only around 1% of returns are audited each year[4]. But if you haven’t filed your tax returns, that does increase your chances. Here’s why the IRS may flag you:

  • You have income reported on a Form W-2 or 1099 but no return filed
  • You claimed refundable tax credits like the Earned Income Tax Credit without filing a return
  • You have signs of high income but haven’t filed (frequent large bank deposits, expensive property/assets purchased, etc.)
  • You’re self-employed and haven’t filed business tax returns

The IRS has up to 6 years to audit after the return’s due date[5]. So if you have multiple years unfiled, you may be looking at a large tax bill down the road. It’s best to get compliant ASAP.

What to Expect in an Unfiled Tax Return Audit

If you receive a notice from the IRS about unfiled returns, here’s what you can expect:

  1. The IRS will request you file delinquent tax returns. This usually covers the last 6 years at minimum[5].
  2. You’ll need to gather records like W-2s, 1099s, receipts, bank statements, etc. to complete the past returns.
  3. The IRS may prepare “substitute” returns for you based on income reported to them. You’ll need to file your own accurate returns to replace these.
  4. After you submit the returns, the IRS will likely scrutinize them closely to verify income, deductions, credits, etc.
  5. You may need to provide documentation to support items claimed on the returns.
  6. Once reviewed, the IRS will send you a notice of any additional tax, penalties, and interest you owe.
  7. You’ll have a chance to contest disputed amounts. An appeals process is available if you disagree with the IRS findings.

This whole process can take many months. Be prepared for a lengthy back-and-forth with the IRS to become compliant. Having an experienced tax professional represent you can help navigate everything smoothly.

How to Prepare for an Unfiled Tax Return Audit

If you get that dreaded audit letter from the IRS, stay calm. Here are some steps to take to get ready:

  1. Gather your records – Dig up old W-2s, 1099s, receipts, bank/CC statements, etc. You’ll need these to prepare accurate past returns.
  2. Request IRS transcripts – Get wage, income and business transcripts from the IRS to ensure your returns match their records[5].
  3. File any “substitute” returns – If the IRS prepared returns for you, file your own to replace them asap.
  4. Consider tax pros – Consulting a tax attorney or CPA can help manage correspondence and negotiations with the IRS.
  5. Gather audit documentation – Be ready to provide documents supporting any questionable items on your returns.

Having your paperwork organized will make this less painful. Dig out those old shoeboxes of tax stuff and get everything together now.

What to Do During the Audit

Once you’ve submitted the past due returns, the real “audit” process starts. Here are some tips to handle it smoothly:

  • Respond promptly to all IRS letters and requests.
  • Provide clear copies of any documents requested.
  • Keep detailed records of all correspondence. Follow up in writing if you discuss anything over the phone.
  • Remain calm and professional in all interactions with IRS agents.
  • Don’t ignore requests or miss deadlines – it will only drag things out.
  • Consider making payments for undisputed tax amounts owed to show good faith.
  • If needed, request an extension or payment plan for amounts due.

Having representation can relieve some of the stress of dealing directly with the IRS. But even if you go it alone, being organized and on top of everything will get you through it faster.

What Happens After the Audit

Once the IRS completes reviewing your returns, a few things could happen:

  • No changes – If the IRS accepts your returns as filed, you’re done!
  • Additional tax due – You’ll get a bill for additional tax plus penalties and interest.
  • Refund issued – If returns show you overpaid, you may get a refund (only if within 3 years of original due date[5]).

Make sure to follow up on any bills or refunds expected. If you disagree with IRS findings, you can appeal or request an abatement of penalties. With tax pros helping, you have experienced guidance for next steps.

Getting that scary audit letter is no fun. But handling an IRS audit for unfiled returns doesn’t have to be a nightmare. With the right preparation and knowledge of the process, you can get through it successfully. Stay organized, know your rights, and consider tax pros to advocate for you. The peace of mind of becoming fully compliant is so worth it in the end!

References

  1. IRS Manual on Nonfiled Returns
  2. IRS Increasing Audits of Nonfilers
  3. 6-Year Assessment Period for Unfiled Returns
  4. Why Your Return May Be Flagged By the IRS
  5. Bringing a Nonfiler Back Into Compliance
  6. What To Do If Your Return Is Flagged

Lawyers You Can Trust

Todd Spodek

Founding Partner

view profile

RALPH P. FRANCHO, JR

Associate

view profile

JEREMY FEIGENBAUM

Associate Attorney

view profile

ELIZABETH GARVEY

Associate

view profile

CLAIRE BANKS

Associate

view profile

RAJESH BARUA

Of-Counsel

view profile

CHAD LEWIN

Of-Counsel

view profile

Criminal Defense Lawyers Trusted By the Media

schedule a consultation
Schedule Your Consultation Now