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Steps to Address IRS Audits for Unfiled Tax Returns

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Alisson Ward

Tax Professional | Content Writer

IRS Audits for Unfiled Tax Returns

What Steps Should You Take to Address IRS Audits for Unfiled Tax Returns? 

IRS audits are a serious matter, and they become even more complex when you have unfiled tax returns. The IRS expects individuals and businesses to file their tax returns accurately and on time. However, if you’ve missed filing your tax returns, it’s crucial to address the situation appropriately. Here, we’ll discuss the steps you should take to address IRS audits for unfiled tax returns, the potential consequences, and the best practices for navigating this challenging scenario. 

Understand the Consequences 

The first step in addressing IRS audits for unfiled tax returns is to understand the potential consequences. Failure to file your tax returns can lead to several adverse outcomes, including: 

  • Penalties: The IRS can impose penalties for not filing tax returns on time or for underreporting income. These penalties can accumulate over time, resulting in substantial financial burdens. 
  • Interest: Unpaid taxes can accrue interest, increasing the total amount you owe to the IRS. 
  • Legal Action: In some cases, failure to file tax returns can lead to legal action, including civil and criminal charges. 
  • Loss of Refunds: If you’re entitled to tax refunds but fail to file, you risk losing these refunds, as there is a three-year window to claim them. 
  • Affects Credit Score: Tax debt can impact your credit score, making it challenging to secure loans or credit in the future. 

Understanding these consequences underscores the importance of addressing unfiled tax returns promptly. 

Gather All Available Documentation 

The next step is to gather all available documentation related to your unfiled tax returns. This includes: 

  • Income Documents: Gather W-2s, 1099s, and any other forms that report your income. If you’re missing any, reach out to employers or income sources to obtain duplicates. 
  • Expense Records: Collect receipts, invoices, and records of deductible expenses that may offset your taxable income. 
  • Bank Statements: Retrieve your bank statements to track financial transactions, as these can be valuable in substantiating your income and expenses. 
  • Previous Tax Returns: If you’ve filed tax returns in previous years, gather copies of these returns. They can provide valuable information for completing the unfiled returns. 
  • Supporting Documents: Any additional supporting documents, such as records of charitable donations or mortgage interest, should also be included. 

The more comprehensive your documentation, the more accurate and complete your unfiled tax returns will be. 

Determine the Appropriate Tax Year 

Identify the specific tax years for which you have unfiled tax returns. This is essential to address each year’s return accurately. The IRS typically audits tax returns within the last three years, so it’s important to prioritize the most recent unfiled returns. 

Consult a Tax Professional 

Addressing unfiled tax returns can be complicated, especially if you have multiple years of unfiled returns or complex financial situations. Consulting with a tax professional, such as a certified public accountant (CPA) or a tax attorney, is highly advisable. Tax professionals have the expertise to guide you through the process, ensuring that you complete and submit accurate returns. 

A tax professional can assist you by: 

  • Reviewing your financial records to determine the extent of your unreported income and deductions. 
  • Preparing and filing the unfiled tax returns on your behalf. 
  • Negotiating with the IRS to reduce penalties and interest if you have a valid reason for not filing. 
  • Ensuring that you comply with all tax laws and regulations during the process. 

Complete and File Unfiled Returns 

Working with your tax professional, complete and file your unfiled tax returns as soon as possible. Make sure the returns are accurate and include all relevant income and deductions. Be prepared to provide explanations for any discrepancies or missing records. 

Filing your unfiled returns demonstrates your commitment to addressing the issue and helps you avoid additional penalties and interest. 

Pay Any Owed Taxes 

If your unfiled tax returns reveal that you owe additional taxes, it’s essential to pay them promptly. The IRS will assess interest on unpaid taxes, so paying as soon as possible can reduce the total amount you owe. 

If you are unable to pay the full amount owed, you may be able to set up a payment plan with the IRS to make manageable monthly payments. 

Cooperate with the IRS 

In cases of unfiled tax returns, it’s crucial to cooperate with the IRS. The IRS may contact you regarding the missing returns, and it’s essential to respond promptly and provide any requested information. 

Cooperation demonstrates your commitment to addressing the unfiled returns and resolving the issue. It can also help you avoid legal actions or further penalties. 

Address Any Penalties 

Depending on the circumstances, you may be subject to penalties for unfiled tax returns. If you believe that you have a valid reason for not filing or that the penalties are unjust, you can request penalty relief. The IRS may consider reasonable cause as a basis for relief from penalties. 

Consult your tax professional to help you navigate the process of requesting penalty relief and provide supporting documentation for your case. 

Consider the Voluntary Disclosure Program 

If your unfiled tax returns involve offshore accounts or unreported income from foreign sources, you may want to consider the IRS’s Voluntary Disclosure Program. This program allows individuals to come forward voluntarily to report offshore accounts and income in exchange for reduced penalties and the potential avoidance of criminal charges. 

Consult with your tax professional to determine if the Voluntary Disclosure Program is a suitable option for your situation. 

Learn from the Experience 

Addressing unfiled tax returns can be a stressful and challenging process. Once you’ve resolved the issue, it’s important to learn from the experience and take steps to prevent unfiled returns in the future. This may involve implementing better record-keeping practices, seeking professional tax assistance, or setting reminders for filing deadlines. 

By learning from your past mistakes, you can avoid facing unfiled tax returns in the future. 


Addressing IRS audits for unfiled tax returns is a complex process, but with the right approach and the assistance of a tax professional, you can navigate it successfully. Recognize the potential consequences of unfiled returns, gather all available documentation, and determine the appropriate tax years for filing. Consult with a tax professional to ensure accurate and complete returns, and cooperate with the IRS throughout the process. By following these steps, you can address unfiled tax returns and prevent future issues with tax compliance. 

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