So, you’re late on filing your back taxes and aren’t sure of how to handle it. Well, you have one of three options: file now, file later, or file never. Our advice? You guessed it, file now. Filing late back taxes as soon as possible is imperative, not only because you’re already late, but because the longer you wait, the worse the situation gets.
Filing late back taxes can be compared to the snowball effect; gradually growing and increasing over time before becoming destructive. Unfortunately, so many individuals tend to overlook the consequences in unfiled back taxes along with the power of the IRS when making their tax filing decisions. Once one is late on filing back taxes, it becomes very easy to fall into the cycle of taking no action; however, taking the simple and proper measures to remedy the situation can save a lot of money, time, and stress.
Filing your late back taxes: The Process
- Gather the proper documents.These documents include:
- Old W-2 forms from employer(s) (or form 4852 in their place)
- 1099 Tax Documents
- Bank statements
- Find and prepare missed tax forms
- Visit the IRS webpage or a local tax resolution firm to find the tax return form (1040 Form)
- Separate each year’s documents with their corresponding tax form (you need one per every year missed)
- Claim all deductions, exemptions, and credits (this will help in reducing your liabilities)
- Seek assistance
- If the process feels overwhelming, which is very well may be, do not hesitate to find help
- There are numerous tax services that will make the process simple and easy for you. Tax professionals will guarantee a thorough and accurate job, while also working to solidify the best return for you.
- Tax professionals can also significantly help with lowering your balance, by securing more deductions, reducing penalties, or working with the IRS to create a payment plan
- Sign and complete your forms
- Be sure to review your forms and information
- Locate the sending address of your notice
- Address the envelope and send the forms to your local IRS office with the payments included
- If you cannot pay in full, pay as much as you can
- If you cannot pay at all, it is important to still send the file
- Work with your tax professional
- Once you have sent in your returns, continue to work with your professional in settling the amount owed and filing your next return
Still avoiding filing your late back taxes? Let’s take a look at what the IRS can do to you.
- First, penalties and interest will increasingly begin to grow on the amount owed
- Next, The IRS may complete a “Substitute for Return,” which combines all missed years into one tax return, and therefore eliminates all chances of federal exemptions or expenses being taken from the amount
- After that, the IRS will find you, eventually, no questions asked
- When the IRS does find you, they will begin to take collections
- Finally, the IRS may place a federal tax levy on your bank accounts, or even a federal tax lien on your personal property
Needless to say, it is a good idea to file your late back taxes as soon as you can. Realizing the consequences of waiting any longer, follow the aforementioned steps and begin the process now.