Under the Internal Revenue Manual, any IRS employee checking for compliance must look to the past six years to find any years in which the individual did not file his/her tax return.  To look further, an IRS agent must gain a manager’s approval, which means that in most cases, compliance is determined by an individual’s having filed all tax returns for the six years prior to the investigation.  So, for example, a taxpayer who forgot to file ten years ago would not normally need to worry about filing the old return.  The Internal Revenue Manual dictates that investigations go no further than six years in the taxpayer’s history to determine compliance.

Additionally, missing tax returns within the six-year time frame are excusable if the individual did not accrue sufficient income to warrant filing a tax return.  For years when this was the case, a missing tax return does not have any effect on the taxpayer’s compliance.  More detailed rules concerning the necessity of filing a tax return may be found in IRS Publication 501, 2008, as there are considerable differences for each individual.  For example, a couple comprised of individuals under 65 who, when incomes are conjoined, makes below $17,900, does not need to file a tax return.  That number changes depending on marital status, whether the individual is the head of the household, age, etc.

On the other hand, in the event that a taxpayer is responsible for a missing tax return, he/she may still choose to avoid compliance with the IRS by not filing the missing return.  In this case, the individual runs the risk of a Substitute For Return being filed by the IRS.  A Substitute For Return does not add any exemptions the individual may be entitled to, as well as deductions or credits.  The other major risk the individual runs when they choose not to pursue compliance is collection by the IRS.