If you're feeling the pressure of delinquent taxes, you're not alone. Each year, millions of Americans get behind on filing for any number of reasons.
One year, a woman came in to do her tax return for 2013 and 2014. She told our preparer that she still owed the IRS $711 for 2012. She had not done her 2013 return because she was afraid she would owe money and she just couldn't deal with it.
She also told us that her daughter and son-in-law had moved in with them, and her husband was quite ill and had not worked much.
After sorting out the paperwork, surprisingly, she and her husband were getting a $1300+ refund for 2014.
Yes, you may owe back taxes or you may be missing out on a refund.
Why You Can't Ignore This
Here's the reality - not filing a past due return can have serious repercussions. The IRS can file a substitute return on your behalf using information collected from your employer, bank, and other sources.
This return could lead to a tax bill. If this bill is never paid, the collection process will begin, allowing the IRS to levy your wages or bank account, or even file a federal tax lien against you.
It's important to file your tax returns for missing years as soon as possible to avoid possible tax liabilities, protect your Social Security and disability benefits and avoid delayed loan approvals from lenders.
In the best-case scenario, you can claim a refund for the previous 3 tax years.
If you have received a notice in the mail, don't ignore it. Get to a tax pro who can help you sort through the paperwork and deal with the IRS process.
4 Steps to File
- Gather important documents. For each year that you failed to file a tax return, make sure you have your W-2 or Form 1099. If you can't find this paperwork, you can request a copy of your income information from your employer. If you plan to claim certain deductions and credits, make sure you have receipts on hand.
- Locate missing paperwork. Tax documents can also be requested from the IRS by filing Form 4506-T, Request for Transcript of Tax Return. The IRS will send transcripts that contain the most important information, not duplicate copies, from your previous W-2s and Forms 1098 and 1099.
- File your taxes using the necessary forms. You can e-file federal returns for the current tax year and the 2 previous years. Anything prior to that will need to be filed by hand using instructions from that tax year.Download the most popular tax forms for previous tax years here.
- Submit your forms to the IRS. Once the IRS receives the necessary forms, you are fully responsible for paying what is owed. You should receive a bill with the exact amount of what's due, including any interest charges that have accrued. It takes the IRS approximately 6 weeks to process past due tax returns.
On making payments, You can request a 60 to 120 day window to pay your tax bill in full on the IRS website or by calling 800-829-1040 at no additional charge.
You can also work out an installment agreement, if you need more time to make the payment.
As our client found out, facing the fear of back taxes is the worst part of it. Plus, getting a refund is a nice bonus after a couple of hard years.