Filing taxes when you haven’t filed in a while can be a daunting task. This is even worse when you have no records. But, it’s very advisable to work diligently on acquiring missing records as soon as possible as the penalties will continue to increase the more time goes on. Filing back taxes is a crucial step in managing your financial health. This article will provide a guide to navigating this process with more confidence.
The first recommendation is to not panic. The best thing you can do after not filing your taxes is to prepare to reverse your position and become up-to-date. Before moving on to explain the first steps in getting up to date, it’s important to make some important determinations.
First, determine if you are required to file a tax return. If you are, here are the penalties for not filing your taxes.
- Not filing your taxes can lead to repercussions such as penalties and interest charges
- Unfiled taxes can lead to tax liens, tax levies, or wage garnishments
- Not filing taxes can create anxiety which is not good for your mental health
- No matter how bad you believe your situation is, the best solution you can take is to start a plan to get up to date and get back in control of your financial situation. If you find your situation quite overwhelming you can reach out to a friend to help you sort through your emotions, as well as consult with a professional to get you on your way to resolving your tax compliance issues.
The process of filing back taxes without records
Start by gathering any financial documents you have for the years in question. If you haven’t filed multiple years, start year by year, with the oldest year first. The documents you need to collect depend on your tax situation.
Make a list of all the income-producing documents you might have, for example
- W-2 if you had an employer
- Interest from savings accounts
- Dividends from none-retirement investment accounts
- 1099 documents if you did any self-employed work like driving for Uber or other freelance gig platform
- Sales of stock
Once you have a list, try and go to those employers and financial institutions to get a replacement document. You may also request a wage and income transcript from the IRS for that year. You can request this information as far as 10 years in the past. To request this from the IRS, you can view your options on this IRS page.
If you were self-employed, examine your financial records as the IRS might not have on file all the 1099 documents that you received, but you must still report all your income. Also, gather statements and invoices as proof of expenses you might be able to deduct.
The next step after gathering the documentation is to file using the appropriate tax software or tax form for that year. Each year the tax laws change so it’s essential to use the software or forms designed for doing your taxes for the year of the back taxes that you are filing.
Here are some other frequently asked questions regarding filing back taxes that might help you in this process.
I have not filed at least one tax return and I find the process overwhelming, where do I start
Understandably, you will feel overwhelmed. If you would like some professional help to get started reach out to a tax professional.
What is the statute of limitations for filing taxes?
There is no statute of limitations on unfiled taxes. The statute of limitations for a tax return usually starts on the date the tax return is due or filed. If you haven’t filed then that clock never starts.
Can a professional help you file back taxes?
A professional can help you navigate the complexities of filing old tax returns. Additionally, you can have better peace of mind knowing someone capable is helping you get caught up on back taxes.
What is my process if I am self-employed?
Self-employed individuals should try to reconstruct their income and expenses by referring to bank transactions, invoices, and receipts. If you are self-employed you should still request your wage and income transcripts from the IRS as your business might have received 1099s or other income-producing documents.
Can I still receive Deductions and Credits?
You should research all possible deductions and credits for that year, including those for business expenses and charitable donations. Depending on how far behind you are in filing your taxes you might not be able to claim a credit or a refund, so you must work through the process to file your old tax returns as soon as possible.
Can I E-File Prior Years’ Tax Returns?
You can e-file tax returns for the current year and the past two years. For older tax years, paper filing is necessary.
Can I File Multiple Tax Returns at a time?
It might be necessary to file multiple tax returns at a time when catching up on back taxes.
What are the penalties for filing taxes late?
The IRS imposes a late filing as well as a late payment penalty. The late filing penalty is greater than the late payment penalty. The longer you wait, the more these penalties accrue.
What if I owe a large tax bill that I cannot afford?
The IRS offers payment plans as well as other options for those who cannot pay their tax bill in full. To know what your tax bill is, you must first file the old tax returns.
How many years of back taxes can you file?
The IRS will only ask you to file the last 6 years of tax returns. So if you haven’t filed in longer than that, focus on getting all your documents together for the last 6 years.
How far back can you file amended tax returns?
You can amend your taxes three years from the date of the original tax return, or two years from the date you paid the tax for the year you want to amend.
