I classify non-filers into four categories:
1-The first group are individuals who do not file tax returns because they find the process of preparing their tax papers too overwhelming or too distasteful and would prefer to engage in activities that make them happy. Stay away from people like this because you will not be able to collect a fee large enough to cover your time.
2- The second group covers the class that has their tax returns ready but may be invested in partnerships that have not issued K-1s either because they are being audited by the IRS, or are having disputes with their external accounting firm regarding one or more treatments of accounting or tax issues which must be resolved before the partnership return is filed and the K-1s are released. I will not discuss this group other than to suggest you speak to your clients’ tax preparer and agree on a method of procedure.
3-The third group covers those who intentionally do not file tax returns and are facing potential criminal and civil penalties. There is no statute of limitations where tax returns are not filed.
4-The fourth group covers those who earn significant income from their jobs, have large withholdings deducted from their salaries, may also pay estimated taxes and are savvy enough to know that eventually returns will be filed that will reflect overpayments that will be applied to future years. With these people, the trick is to beat the government and file the returns before files are opened by IRS and correspondence begins to mount.
Those in category 4 are the ones that I have found cause the spouse to make the aforementioned comments regarding non-filing of tax returns or non-payment of taxes. If there is a non-working spouse ask whether there is a joint checking account or separate checking accounts and what are the sources of deposits into her account. In all cases, you would eventually want to see copies of all accounts and trace the deposited funds and disbursements in all of them. However, if there is a joint checking account probably the Husband has been overseeing that account, funding that account and has been signing the significant payments from that account. The same would apply to his separate checking account. As to the spouse’s separate account it will probably be funded by transfers from the Husband, deposits of income from the spouse’s investments, and social security (if applicable). Certainly, as the spouse’s advisor, you will proceed to either have the Husband become current on all tax filings or consider having the spouse file separate returns.