Fail to File Tax Returns?
It must bring a criminal charge against the non filer for failure to file within 6 years of the date the return was originally due.
So, if the return was due April 15 of 2003, the IRS cannot prosecute for the failure to file that return after April 15 of 2009.
This criminal prosecution deadline is important in relation to civil penalty assessments for failure to file returns.
There is no deadline for the IRS to impose these civil penalties in addition to any tax owed. So while you can't go to jail for not filing the 7 year old return, you will always be required to file the return if you had an obligation to do so. In theory, the government could assess the tax, penalty and interest forever.
The IRS' internal policy is that old returns – beyond six years should generally (not always) be ignored.
Read the Internal Revenue Manual 0021 and IRS policy statement P-5-133 for more.