Audit Time Limitations

• The ordinary statute of limitations allows the IRS to audit your tax return within three years of its original filing. However, if you fail to file a tax return, the statutory period doesn't begin until you do. For example, if you fail to file your 2011 tax return by the April 15, 2012, deadline, and don't file it until April 15, 2014, the three-year limitation period begins on April 15, 2014. Therefore, the IRS can choose your 2011 tax return for audit until April 15, 2017.
  
  

Collection Time Limitations

• A separate statute of limitation applies to the time the IRS has to collect the tax you owe through enforcement procedures such as wage garnishment, asset liens and levies on your bank accounts. Once your tax is assessed, the IRS has 10 years to use any legal means of collecting payment from you. If you fail to file your return, there is no limit on the number of years the IRS can enforce collection against you. Since an assessment can occur at any time on an unfiled tax return, and the time of the assessment starts the 10-year statutory period for collections, there is no specific time frame for the IRS. The collections limitation period depends on if and when the IRS contacts you about your unfiled return and assesses tax.
  
  

Late-Filing Penalty

• When you fail to file a tax return by the due date, you are subject to late-filing penalties if you owe tax with the return. The maximum penalty the IRS can charge you for filing late is equal to 25 percent of the tax you underpay that is originally due on the filing deadline. However, you only accrue 5 percent for each month it's late, so if you can get your return filed before the five months, you can minimize your late-filing penalty. However, once you file your return, the IRS will continue to charge a 1/2 percent monthly penalty on the outstanding tax debt that remains.
  
  

Minimum Tax Penalty

• In the event you fail to file a tax return that would report a refund or zero tax due, the IRS will not impose any tax penalty on you. If you do owe a small amount of tax with the unfiled return, minimum tax penalties will apply. As of 2011, the IRS will charge you a minimum penalty equal to the smaller of $135 or 100 percent of the tax you owe if you file your return more than 60 days after the original due date. However, this penalty only applies if it is greater than the total 5-percent monthly late-filing penalty.