Filing Back Taxes - How to File and What to Know

With the IRS and unfiled back taxes, one good fact is that the IRS has an unwritten policy about not prosecuting people that voluntarily file back taxes. However, things are different if the IRS finds you first; they can punish individuals up to 1 year in prison and $10k for every year unfiled. You probably will not go to prison because the US doesn't have enough prisons for all non-filers, but be assured that they will impose much harsher penalties if they find you before you voluntarily file your taxes. Understand why and how you can file your unpaid IRS taxes below. Taxes can be prepared from decades ago with proper documentation.

Why You Must File Back Taxes, Even If Late

1. Penalties and Interest will grow significantly and increase the total tax amount you owe the IRS.
   
   
2. If you do not file, the IRS may complete a "Substitute for Return," which is not optimal as it is one tax return for all years. No federal exemptions or expenses will be applied and therefore increase your total tax liability.
   
   
3. If the tax is assessed and the IRS completes a substitute return for you, they will begin collecting. This means they can place a tax levy on wages or bank accounts, or a federal tax lien on your personal personal property.
   
   
4. The IRS will eventually find you. They have a complex computerized system that works slowly, but efficiently.
   


Even if the IRS has completed a Substitute for Return for you, it is in your best interest to file your back taxes because generally they will adjust your balance. Realize that you cannot receive a car loan or mortgage with unfiled tax returns if there is a balance owed. Social Security and other benefits can be removed as well. The consequences of filing voluntarily and not being able to pay are much less than if the IRS finds you first. Even if you file voluntarily and late and cannot pay, you may be able to negotiate a settlement with the IRS for less than the amount owed. Lastly, piece of mind that you no longer have to hide and will be considered in good standing with the IRS, even if you cannot pay the amount owed, is a reason to file.

How to File Back Taxes

1. Gather Necessary Information : Find old documents needed to file old returns. Particularly old W-2s, and 1099 tax documents. If you cannot find the docs, you can ask your old company for them or contact the IRS at 1-866-681-4271. If they do not have the information, you can call the IRS and request income data for missing years. It is likely that the IRS will have this information because all companies are required to report this information to the IRS. If they do not have it, you can use form 4852, which is a substitute W-2 that estimates what your W-2 would have been for those given years.
   
   
2. Prepare the tax forms. You will need to use the specific years tax return form for each year you missed. Generally, the IRS will require you at least file your last six years of tax returns (including the current year), but they may request a tax return that is older than six years. You can find these tax forms on the IRS website or any tax resolution firm likely has them. Be sure to claim deductions, exemptions, and credits to reduce your total tax liabilities. You can also go into an IRS office and get them. Even with sufficient knowledge, due to the complexity of the code, it is best to have a tax pro prepare them if you expect to have a tax amount that you cannot pay when the return is filed.
   
   
3. Contact the Right Tax Firm: It is a good idea to use a tax specialist like at Tax Attorney or Tax Certified Public Accountant that can file back taxes AND setup a resolution with the IRS. A total back taxes trusted firm will file your back taxes and help you find any settlement methods that are appropriate. If want to file them on your own, the easiest form of resolution is to send in a request for an Installment Agreement with the tax return. This will allow you to pay back the taxes owed in monthly installments. This type of agreement is the easiest to get accepted but there are many IRS tax settlement method you can pursue as well. For more info, use the third article on the right.
   
   
4. File your back taxes and other paperwork. If you received notice from the IRS to file the back taxes, send to the address listed on there, or send to the normal address you send your tax returns (IRS Addresses for Filing). Once you have your returns filed, you can next work with your tax professional to try to settle or reduce the total amount you owe. In most cases, you will need to come to an agreement with the IRS in regards to a tax payment plan or tax repayment methodology.

Advice for Success With Filing Taxes

1. Do not delay, the longer you wait, the worst penalties can get. It is NEVER too late to file a return.
   
   
2. Use a tax professional that can File AND Reduce your back taxes. You will likely end up saving more money by using a tax professional than if you attempted to do everything on your own since they are experts and have handled many situations similar to yours. This is especially important if you do not have enough money to pay the taxes owed. The IRS always tries to make individuals feel that they must pay at all costs when this is not the case at all and you can find a settlement method that is right for you.
   
   
3. If you would like a professional tax team on your side to help you file and resolve back taxes, or you would like a complimentary consultation to understand what is involved with the process, request a free quote today above.

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Paying Back Taxes Owed
There are several ways you can pay back taxes to the IRS. Different payment options exist and you should pick the best one dependent upon your financial situation.

Ways to Settle Back Taxes
If you have taxes owed that you cannot pay after filing back taxes, you will need to settle these amounts with the IRS as soon as possible to prevent future penalties and interest from adding up

Consequences of IRS Catching Non-Filers
Having unfiled returns is far worse than filing the returns and not paying. Will the IRS find you? What happens when they do.

Amend Incorrect Tax Returns
Reduce tax debt owed by amending old returns to claim exemptions that you may have missed. The IRS is very understanding to mistakes, they happen to everyone.

Missing, Lost, or Never Received Your W2?
Find out how you can obtain your W-2

File Back Taxes Abroad or Overseas
This describes why and when a US citizen who is abroad needs to file a tax return and how to do it (what forms to use)

What if I Did not File my Taxes?
Did you miss the April 15 filing deadline? If so, you need to realize that you can still file your taxes to ensure that you do not get into hot water with the IRS.

Find Out How Much IRS Taxes You Owe
Understand the different ways you can find out how much you owe the IRS if you are unsure.