Every once in a while, I deal with someone who hasn’t filed taxes in years. Sometimes it’s just a couple of years and at times, it is 10+ years. No matter what happened in the past, you should take 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. 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 7 years but IRS does purge records from time to time. Please keep in mind, the information in wage and income transcript 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, it’s a good first step to request your wage and income transcript from the IRS.
Unfortunately, wage and income transcript can’t be obtained online. You will need to prepare and mail the 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 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 that you file the most recent year first and then file 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 3 years.
Ask your tax professional to attach a leniency statement to the tax return and explain the reasons why you were not able to file your taxes on time. This will prove to be worth your time because IRS tends to be more lenient with taxpayers that 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. If you need time to pay your taxes, ask for a payment plan. If the amount is a lot 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, comments or want clarification on anything listed above, feel free to use the comment box below.