It is not uncommon to find that you have unfiled taxes that go back a few years. Most people prioritize filing their taxes every year, but for various reasons, people don’t always get it done. Don’t panic if you realize that you may have failed to file taxes in previous years.
Figuring out how to file old taxes is the surest way to get yourself out of this mess. You should note that the IRS does not have a statute of limitations that stipulates the time to file overdue taxes.
It is in your best interests, then, to file at the earliest chance, especially if you still hope to claim tax refunds or deductions. This guide will explain how to file old taxes and spell out why you should do so as soon as possible.
Why You Should File Your Old Taxes Promptly
Don’t worry: You’re hardly the only person who missed filing your tax returns on time. Roughly 5% of American taxpayers do this per year. This often gets unnoticed by the IRS in the initial years, but it won’t take long before they catch up with you. It’s imperative, then, to file your old taxes as soon as possible if you want to be in good standing with the IRS.
Putting it off once you realize you have back taxes is not a good idea because the IRS eventually pursues tax defaulters. The agency is expert at collecting back taxes and punishing those who owe, so continuing to let this slip will probably lead to stiff penalties and other consequences.
Taxpayers who wait for too long often prompt the IRS to file a Substitute for Return, which is a rudimentary tax return on their behalf based on employers’ income reporting. You should avoid this at all costs, as you are likely to pay more under such an arrangement. The IRS won’t claim any credits or deductions on your substitute return, so you will miss out on any benefits you are eligible for.
All the Tax Documents You Need to File Old Taxes
The IRS will also allow you to claim tax deductions if you have not passed a three-year deadline. This is why you should always keep receipts of all your expenses you wish to claim as deductions.
More complex returns might require additional documents, depending on your circumstances. It’s a good idea to get the advice of a tax professional in such cases.
How to File Old Taxes in 3 Simple Steps
Filing old taxes is not as complicated as it may sound. This is especially true if you have the right team of advisors by your side. Here are a couple of steps on how to file old taxes:
1. Gather All the Documents You Need
The first step to take when you want to clear your balance with the IRS is to ensure you have all tax documents. This should not just be tax documents for the current year, but also for previous years. It is impossible to file 2019 returns with a 2020 tax form, for example.
Requesting your income transcripts from the IRS is a great way to ensure that everything is accurate, and they will be necessary to file forms W-2 and 1099. You should also take this time to update the forms with any income you received that the IRS is not aware of.
Sometimes the IRS will ask you to file tax returns for the current year and the past six years. This often occurs when you have failed to file tax returns for several years.
2. Fill in the Tax Documents And Submit Them to the IRS
Use the forms you’ve gathered to fill out your returns accurately. Double-check your entries with the transcripts you got from the IRS. Remember that the IRS knows how much you earned during the year, and this should be the same as what you report. Sometimes you may find out that you owe the IRS but can’t make the payment in full. You have the option to ask for a payment arrangement in such cases and can also request penalty relief if you qualify. This is often allowed if you failed to file taxes for one year only.
3. Monitor Your Tax Status
Completing the tax documents and submitting them to the IRS should not be the last step you take. It is equally important to monitor the processing of your returns. You can easily do this by requesting the updated transcripts from the IRS.
The IRS may have taken some action like filing a Substitute for Return for failure to submit your tax returns. It’s advisable in such cases to ensure that the IRS halted any penalizing efforts upon your filing. Following up with the IRS, or getting a tax expert involved, is a great way to be sure you have no pending penalties or other sanctions due to your old taxes.
Silver Tax Group Can Help You File Your Old Taxes
You should not be embarrassed just because you have failed to file your taxes for a long time. The most important thing is to know how to file old taxes once you realize you are late in filing, and to do so without making errors and incurring further IRS penalties.
Silver Tax Group has a team of tax professionals experienced in resolving disputes with the IRS to get the most favorable outcomes for our clients. Contact our office today for advice on how to file old taxes or other taxation issues