Every once in a while, I deal with someone who hasn’t filed taxes in years. Sometimes it’s just a couple of years; at times, it is 10+ years. No matter what happened in the past, it would be best if you took it upon yourself to get current with your taxes.
It’s just the right thing to do because, sooner or later, the IRS will catch up. There’s no statute of limitations on unfiled tax returns.
It is daunting.
What years should I file? Where can I find all my W-2s?
It’s not as bad as it sounds. Here’s a handy guide:
A step-by-step guide on what to do if you haven’t filed taxes in years
1 – Request Wage and Income transcripts from the IRS
If you don’t have W-2s or other income records, you can request the data from the IRS. The wage and Income transcript that the IRS provides on request has data related to W-2s, 1099s, and 1098s.
In most cases, you can go back seven years, but IRS does purge records from time to time. Please keep in mind that the wage and income transcript information is reported to the IRS by your employer or bank at the same time it was reported to you.
Even if you have income records, requesting your wage and income transcript from the IRS is a good first step.
Unfortunately, wage and income transcripts can’t be obtained online. You will need to prepare and mail Form 4506-T to the IRS.
2 – Go to a tax professional, an Enrolled Agent, or Certified Public Accountant.
Once you receive your wage and income transcript, the next step is to seek a competent tax professional. Ask family, friends, or Google. Do some research, make some calls, and specifically ask your tax professional about doing back taxes.
You might think you are going to a tax professional for advice, but that’s only part of the reason. You can prepare your current year’s taxes online; that’s not a problem. When it comes to back taxes, you will not be able to prepare them online. Tax professionals have access to prior year income tax software and, in most cases, will be your best hope to get current with the IRS.
3 – File the most recent year first, followed by previous years.
Your tax professional will suggest you file the most recent year first and then all previous years. That’s the best way to get current with your income tax filing. If you have refunds coming, you can only go back three years.
Ask your tax professional to attach a leniency statement to the tax return and explain why you could not file your taxes on time. This will be worth your time because IRS tends to be more lenient with taxpayers who come forward voluntarily and get current with their taxes.
4 – Wait for the IRS to process the returns.
IRS takes some time to process paper-filed returns. It isn’t possible to e-file returns from prior years. It might take up to 8-12 weeks before you hear anything back from the IRS.
In most cases, you will receive a notice with penalties and fees. Ask for a payment plan if you need time to pay your taxes. If the amount is much more than you can afford to pay even if you were approved for the payment plan, then an offer in compromise might be your best option.
If you have questions or comments or want clarification on anything listed above, feel free to use the comment box below.