What to Do If You Haven’t Filed Taxes in Years

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If you haven’t filed taxes in a few years, you’re not alone: ​​The IRS expects a $500 billion decline in tax revenue this year. (That’s a decline of more than 10% from last year.) Surprisingly, the IRS also noted an increase in online conversations from people saying they won’t pay taxes this year and that they’re willing to take the risk of not being audited.

So, with just a few days left until the April 15 deadline , you may be wondering: What if I continue to ignore my taxes? How long can this scam continue? Unfortunately, this is a very risky game . You’d better file as soon as possible or you’ll face costly fines and interest. Here are the steps you need to take to eliminate unfiled tax returns and get back on track with the IRS.

What happens if you don’t file a tax return?

First of all, it is important to clarify the difference between failure to file a return and failure to pay. Non-filing of a tax return means failure to file tax returns when due, and tax delinquency occurs when taxes due are not paid when due. The most important tip here is to file your return even if you can’t pay. Filing your return on time avoids the penalty for failure to file, which is usually higher than the penalty for failure to pay.

The IRS imposes a late filing penalty of 5% of the amount of unpaid taxes for each month the return is late, up to a maximum of 25% of the amount of the unpaid tax bill. In addition, interest accrues on both unpaid taxes and penalties from the date of payment until the debt is repaid.

Additionally, if you do not file a claim, you will of course not receive any refund. You must claim your refund within three years, so if you don’t file, you risk losing all the money you’re owed.

Steps to take to file old taxes as soon as possible

The good news is that the IRS generally prefers filing late rather than not filing at all, and has programs to help taxpayers comply.

Gather your documents

Start by collecting basic information, such as W-2 and 1099 forms from employers; banking and investment reports; receipts and records of deductible expenses; any previous tax returns you still have.

If you are missing documents (which is understandable at this point), you can request wage statements from the IRS in a few different ways:

  • IRS.gov (use the “Get Transcript” tool)

  • Form 4506-T (Tax Return Transcript Request)

  • Communication with previous employers

Determine which years you need to file for

The IRS typically focuses on unfiled returns for the last six years, although by law you are required to file returns for all unfiled years. Priority should be given to the last three years to give you a chance to receive a potential refund. After that, focus on those years during which you had significant income.

Prepare and file these returns.

The file is returned in chronological order, starting with the oldest. Unfortunately, one of the most common filing options, such as IRS Free File, does not take into account prior tax years. However, you have several filing options:

What are your thoughts so far?

  1. Use business tax preparation software . Think big names like H&R Block , TurboTax and FreeTaxUSA.

  2. Hire a tax professional . Certified Public Accountants (CPAs) or Enrolled Agents can help with complex returns. Here’s how to make sure your preparer knows what they’re doing.

  3. File by mail . Submit separately each year along with appropriate documentation.

Specify payment options

If you owe taxes but can’t afford to pay the full amount, call the IRS and ask about the following options:

  • Installment Agreement: A monthly payment plan until you pay.

  • Offer in compromise: settlement of an incomplete amount of debt.

  • Status currently uncollectible: Temporary relief of hardship.

From here, the IRS can help you take advantage of some special programs available to you, such as:

  • Administrative fine waiver: They can waive failure to file fines for first-time offenders with a good compliance history.

  • Voluntary Disclosure Programs : The IRS offers a variety of programs to encourage taxpayers to volunteer as a means of addressing non-compliance and limiting the risk of criminal prosecution.

  • Simplified Filing Procedures : For taxpayers with foreign accounts who have not filed the required FBAR forms.

Forward

The worst approach is to continue doing nothing. The IRS has extensive information collection capabilities and ultimately identifies non-filers. By taking proactive steps, you can minimize penalties, protect your financial future, and eliminate the stress of an unfiled return.

If you have multiple years of unfiled returns, or perhaps even need representation from the IRS, you really should consult with a qualified tax professional .

Once you’re back on track, you can avoid the headache that brought you to this article and start using a spreadsheet to track all of your tax information throughout the year. I’ve created a basic template to get you started here . The goal is to create a convenient archive of all your tax returns in one place, making it much easier to file on time next year.

Remember: your current situation is fixable, and addressing it as soon as possible is always the smartest choice.

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