Taxpayers fail to file the required business returns for many reasons. If your business has unfiled tax returns, you should be aware that failure to file your business tax returns may be construed as a criminal act by the IRS. This type of criminal act is punishable by one year in jail for each year not filed. Needless to say, it’s one thing to owe the IRS money; it’s another to potentially lose your freedom for not filing a tax return.
The IRS may file “SFR” (Substitute For Return) tax returns for both the business income tax returns and the business’ payroll tax returns. These SFR returns are the IRS’ version of an unfiled tax return and are filed in the best interest of the government. The government will use the highest income figures it can find and will give the business no expense deductions. In filing payroll tax returns, the IRS will use its own wage figures and then base the FICA and Medicare taxes upon those numbers.
Regardless of what you may have heard, you have the right to file original returns, no matter how late it’s filed.