By April 15 of every year, most Americans have an obligation to file a tax return with the Internal Revenue Service. While the federal government has pushed back the filing deadline this year, you may be wondering about your liability for unfiled taxes.

Like many taxpayers, you may believe the IRS cannot take action against you if your unfiled tax return occurred more than 10 years ago. While it is true that there is a 10-year statute of limitations for collecting unfiled taxes, there are many exceptions to the rule. If you have not filed taxes in the past, you should understand how the statute of limitations works.

When the clock starts

The 10-year statute of limitations does not start when you fail to file a tax return. On the contrary, the clock does not begin to run until one of the following happens:

  • The IRS uncovers your missing tax return
  • The IRS files a substitute tax return for you
  • You file a tax return to catch up on your taxes

Even though these events start the statute of limitations clock initially, some actions may reset the clock. If you make an offer in compromise, appeal your back taxes or declare bankruptcy, the clock begins anew. If you take these steps, you may have to wait an additional decade to be free from IRS reach.

How filing benefits you

Failing to file tax returns can be stressful. After all, you may face both civil and criminal penalties for not complying with tax law. You may also harm your financial future. For example, if you do not regularly file taxes, you may not have enough documented work to take full advantage of Social Security, Medicare or other government programs. Furthermore, if you do not file tax returns, you may miss out on tax refunds.

Clearly, the IRS does not take failing to file taxes lightly. Therefore, even if you have not filed tax returns in the past, you should not let the common, 10-year statute of limitations misconceptions dissuade you from doing what is in your legal and financial interests.