The easiest way to get out of trouble with the IRS over back taxes is to file your tax returns. If you’ve missed a year or more for filing tax returns, you may be wondering what sort of options are available to you. You can protect yourself with the following steps:
Look For and Gather Tax Paperwork
Get a copy of the tax return for the last year that you filed. For all years you haven’t filed yet, look for w-2s from employers and any other forms you may have been mailed for investments, savings accounts, insurance, etc. If you’re missing any documents you need, you can often get copies of them from the IRS (for free).
Prepare Your Tax Return
Whether you hire a tax professional, use an online software program, or fill out the paperwork on your own, plan to spend a couple hours on each year that you need to file. You cannot electronically file previous year returns, but you can use tax software to help you file and then mail the return to the IRS.
Depending on your situation, it may be in your best interest to work with a tax professional as they can help you deal with the IRS over back taxes. They have experience negotiating with the Internal Revenue Service.
Once you fill out the paperwork, you’ll know whether you are owed a tax return or if you owe the IRS for back taxes.
Mail each of your tax returns in separate envelopes, and mail them with Certified Mail. This will let you know when each has been received by the IRS. Keeping each year in separate envelopes will prevent clerical errors by the IRS if viewing multiple years of returns all at once.
Get Your Tax Refunds
If you are owed a refund, you have three years to claim it before it becomes property of the U.S. Treasury. If you are owed a refund for one year you’re filing for, but owe taxes for other years – your refund will first be applied to the taxes you owe. If you owe back child support or are late paying federal student loan payments, your refund will be used to pay those debts before you receive any, as well.
Pay Taxes Owed
If you find you owe the IRS for back taxes, make a plan for how you will pay them. If you have enough to pay it off in one lump sum – this is your best option, of course! It will save you on late fees and penalties and interest charged. If you owe more than you can afford to pay, you can work with the IRS to set up a monthly payment plan; or compromise and pay less than the total amount owed in some situations. Do not ignore the IRS or the fact that you owe them money as it can result in tax liens, wage garnishment, and more.
Plan for the Future
While you’re getting your taxes situated for previous years, take some time to plan for future years. You can ask your employer to withhold additional taxes if you fear you’ll owe taxes. You can change your tax withholdings and dependents, or send the IRS estimated tax payments on a quarterly basis to reduce the possibility of owing taxes the next time you file.