Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.
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The first thing your daughter will need to do is file the missing SC tax returns. She may even be due a refund. She must file all the returns, but if a refund is due, she only can get the refund if it is within the last three years
The rules for state income taxes are the same as the rules for the IRS - if a return is not filed, the state can come back and demand that return at any time - even if it's 30 years down the road.
So, I would go to a tax preparer in your area and get the returns filed.
is there a penalty for not filing
Yes, if tax is due
If she does not owe taxes is there a penalty for not filing? If she over paid, will she get money back when she files
That is correct. If no tax is due, there is no penalty.
if she over paid, will she get money back?
If it is within the last three years, yes
If it has been longer than three years, no