Topic: adviceS
FAQ of the IRS wrote:
....the statute of limitations for IRS to assess and collect any outstanding balances does not start until a return has been filed. In other words, there is no statute of limitations for assessing and collecting the tax if no return has been filed. ....
...The IRS continues to improve its database of income transactions and increase its ability to identify people who have a filing requirement but have failed to file a return. Eventually, contact will be made and the correct tax liability computed. By this time, howevr, the original tax bill will be multiplied many times by the addition of interest and penalties....
....There are numerous practical reasons to file tax returns. Whether buying a home or financing a business, copies of filed returns must be submitted to the lending institution. Important programs like federal aid to higher education also require applicants to submit copies of tax returns to qualify for loans. And the filing of tax returns has a tremendous impact on the future. Social Security retirement and disability benefits as well as Medicare are all computed based on a person?s lifetime earnings reported to the IRS and the Social Security Administration. State benefits such as unemployment compensation and industrial insurance are also based on reported income...
For people with multiple unfiled returns, IRS practice is generally to limit investigations and examinations to the last six years.
http://www.irs.gov/businesses/small/article/0,,id=122901,00.html