If you’ve fallen behind on filing your taxes, you’re not alone. There are a multitude of reasons that people get behind on taxes, from family emergencies to mental health crises to natural disasters. This can turn a difficult situation into an even bigger source of stress, but fixing the problem might not be as bad as you think.
You can file back taxes for any year, no matter how far in the past. However, in order to be considered “in good standing” with the IRS, you only need to have filed your federal income tax return for the previous six years. Unfortunately, if you are owed a tax refund, the IRS will only pay you up to three years past the due date.
One of the biggest challenges of filing back taxes is finding the right tax documents to show your income, deductions, and tax credits. Hiring professional tax preparation services, such as S.H. Block, can help you rebuild your financial history and get those past due tax returns properly filed.
What Happens if I Don’t File My Tax Return?
It’s very possible that you have forgotten or missed a filing deadline with the IRS, and nothing happened. However, it would be a mistake to think that the IRS did not notice. Your employer must report your income to the IRS, and they know if your income is above or below the filing threshold. They may not catch up to you right away, but if you miss multiple years they will start by sending you mailed notices about your delinquent taxes.
If you start to accrue significant tax debt, they can also:
- Assess penalties and interest against your unfiled tax returns and tax debt.
- Begin debt collection through liens, levies, wage garnishment, and more.
- Put a hold on your driver’s license renewal, or your business license, or even your passport.
- You could miss out on any tax refunds or credits that you should have received.
- If they believe you are deliberately concealing your tax liability, they may take legal action against you, including criminal tax evasion.
Because the problem of unpaid taxes can quickly spiral out of control, it’s much better to address any past due tax return as soon as you can, even if you owe money that you cannot currently afford to pay.
If you don’t file back taxes, the IRS may file a substitute tax return for you. This will be a very basic tax return that doesn’t account for all the deductions and credits that you could take, which means they will often find that you owe a higher amount than you actually should.
How to Resolve Back Taxes
If you’re ready to get caught up on filing taxes—even if you don’t think you can pay your tax bill—the IRS is usually willing to work with you to resolve your tax situation.
First, you’ll need to gather all the documents related to the years that you need to file back taxes. Employers may not always have these available, but you can get your wage and income transcripts from the IRS by filing Form 4506-T.
Second, you’ll need to make sure you have the right tax forms. For instance, if you’re filing 2020 back taxes, you’ll need your Form 1040 from the tax year 2020.
Once your forms are filled out, you’ll need to mail paper copies to the IRS. They do not accept electronic copies for previous tax years. In addition, if you are filing multiple years, it is better to send each year’s paperwork in a separate envelope to avoid any confusion.
After you’ve filed tax returns, it will usually take the IRS quite a bit of time to process them. If the taxes owed are more than you can pay, this is the time to make a plan for how to address that amount.
The IRS offers several options for paying down your debt, including an installment agreement payment plan. However, because everyone’s situation is different, you would benefit from talking with an experienced tax professional about your best option for payment. For instance, if you are currently experiencing a hardship like a job loss, you may qualify for “Currently Not Collectible” status, which will temporarily halt collection efforts. A professional can also help you with penalty abatement, to help reduce your debt.
RELATED: What Are Installment Agreements?
Does My IRS Debt Ever Expire?
If you’ve filed taxes, but haven’t made any effort to pay the IRS, you may be wondering if there is a statute of limitations to your debt. The Collection Statute Expiration Date (CSED) is 10 years from when you filed taxes, at which point your debt is erased. This may sound like an easy option, but the IRS will absolutely try to collect money from you before then, and as the CSED approaches they may get more and more aggressive about it.
In addition, there are things that can extend the CSED, such as filing for bankruptcy. You can also voluntarily extend the CSED by taking part in an installment agreement, offer in compromise, or innocent spouse relief.
Keep in mind that if you don’t file income tax returns, the IRS has no statute of limitations for collecting for those years.
Ready to File Back Taxes? S.H. Block Can Help!
If you’re ready to file your tax return and get back in good standing with the IRS—especially if you have old business tax returns that need to be filed—contact the tax professionals at S.H. Block Tax Services to ensure that you’ve got the proper documentation and are taking advantage of the deductions and credits that you are owed. Because the tax code changes from year to year, having a knowledgeable professional on your side will help you navigate the best practices from year to year.
We also have experience with what kind of documentation you need, and where to find it, when putting together previous years’ taxes. We can help you find the bank statements and income information needed for your back tax returns.
This is especially useful for the self-employed, whether you made estimated tax payments or missed the deadlines. Figuring out past years’ business income can be very challenging, even if you’ve been diligent about organizing receipts and paperwork.
If you’re seeking a tax expert who has your best interest in mind, look to S.H. Block for guidance on resolving tax issues. We have decades of experience helping people in the same situation as you. It’s easy to fall behind on taxes, but we can help you resolve back taxes and figure out a solution for paying your debt.
The content provided here is for informational purposes only and should not be construed as legal advice on any subject.