There are countless IRS tax payers out there who have yet to file back taxes. There are also various reasons for the delay, one of them being that they may be afraid of the consequences.
On this note it should be a relief to know that the IRS has an unofficial policy about not prosecuting those tax payers who file their back taxes on their own and doing so voluntarily.
Keep in mind that if you do not voluntarily file your back taxes with the IRS, it is only a matter of time before they will find you. This is not a good scenario for any tax payer as the punishment can be severe. You may be jailed for one year and fined $10,000 for every year of unfiled taxes. You be the judge, would you rather file your back taxes before being caught and not be prosecuted? Or would you rather get caught and potentially go to jail and pay the IRS penalty?
Chances are that you may not necessarily go to jail since the prisons would be vastly overcrowded if all people who failed to file their back taxes were to be sent there. This does not mean that there aren’t harsh consequences for those tax payers who have not filed their back taxes with the IRS. Again, it is always better to voluntarily file your back taxes rather than be caught and penalized by the IRS.
There are ways to file any tax owed to the IRS:
Back taxes can possibly be filed from years or even decades prior if there is proper documentation involved with the IRS tax filing process.
There are various reasons for the tax payer to file his or her IRS back taxes even if they are very late:
If you do not file the amount of back tax owed, there will be interest added to it by the IRS. This will continue to increase the total amount of back taxes the tax payer owes.
For those tax payers who have unfiled taxes, the IRS has something called a "Substitute for Return" which is a single tax return for all of the years of back tax. This is generally a negative for the tax payer. Also, if a tax payer chooses not to file his or her back taxes with the IRS, there will be no federal exemptions available to them. Not only that, but there will be more penalties and interest added to the tax amount owed which will significantly increase overall liability of the tax payer to the IRS.
Remember that once the IRS has completed a Substitute for Return on your taxes, they will begin their collection process.
The IRS can do a number of things in the event that unfiled back taxes are owed to them. They can place wage garnishment and take a large percentage of your salary to pay back the tax as well as tax levy your personal bank accounts and property.
It is only a matter of time before the IRS finds you.
Their computer system is very complex so it works slower, yet it is efficient in finding missing information and who is or is not paying their tax amounts owed to the IRS.
If the IRS has completed the Substitute for Return, the tax payer can still file for back taxes with the IRS since they will adjust the tax balance accordingly to the paperwork and situation. It is always better to file back taxes rather than leaving them unfiled and having the IRS come after you for their money.
Another reason to file for your IRS back taxes regardless of how late is that you cannot be eligible for any mortgage or car loan with balance owed on unfiled IRS tax returns.
The tax payer can also lose their Social Security benefits as well in this situation. If you file your back taxes with the IRS voluntarily, you may face some consequences, but they will be far less than if you leave your taxes unfiled and the IRS finds you before.
Even if you cannot afford to pay the back taxes owed, you can still settle with the IRS provided that you voluntarily filed the back tax. The IRS will generally be willing to reach a settlement of the taxes owed by the tax payer who chooses to file for their back tax. If you cannot afford to repay all of the back tax owed, you will be considered in good standing with the IRS if you voluntarily file your back taxes rather than leaving them unfiled. This should be reason enough for any tax payer to file their back taxes with the IRS.
How exactly are IRS Back Taxes filed?
The first step in filing back taxes with the IRS is to find old documents that are related to the old returns that are unfiled.
This includes old 1099 tax papers and W-2s. These documents are the most relevant in this situation regarding the IRS. In the event the tax payer is unable to locate these documents, they can request them from their old company or employer, or even contact the IRS at 1 866 681 4271.
The tax payer can request income data from the IRS regarding their back taxes for the missing years where there are no documents on hand. The IRS should have relevant information since companies and employers have to report information to them. In case the IRS does not have the information, there is a 4852 form that is considered a substitute for the W-2. The purpose of this form is to estimate the W-2 for the missing years of tax returns.
The tax payer will have to prepare a number of tax forms for the IRS:
For each year of missing tax returns, you will need to find the corresponding tax return from for that specific year. The IRS tax forms must be appropriate to the years.
The IRS usually requires the tax payer to file the previous six years of tax returns which includes the current year. It is possible for them to also ask for an older tax return as well.
The appropriate tax filing forms are available on the official IRS website or at tax firm specializing in tax settlements with the IRS. It is important to claim any tax credits, deductions and exemptions to reduce the amount of liability overall.
This can be done at the IRS office as well. It is in the best interest of the tax payer to have their missing and unfiled tax returns done by a tax professional since the IRS has a complicated tax code. This should be done even if you cannot afford the back taxes involved.
It is important to find a reputable tax firm that is capable of working with the IRS to reach a resolution or settlement. Professionals who can do this are Tax Attorneys and Tax Certified Public Accountants.
A reputable tax firm can not only help you file back taxes owed, but also reach a settlement with the IRS. In case you would like to file your tax returns without the help of a n IRS back taxes professional, you can send the IRS an Installment Agreement along with the filing of the tax return.
This allows you to repay the back taxes in set monthly payments that are more manageable. The IRS is usually willing to accept these terms of repayment so it is a reliable method. There are also other settlement options with the IRS available.
Filing IRS back taxes and related documentation:
In the event the IRS sends a notice for you to file back taxes, respond to the address that is on the notice or the regular IRS address you file taxes with. It is important to respond to a notice that the IRS has sent you because it gives you more credibility in their eyes.
After your tax returns have been filed with the IRS, you can consult with a tax professional to work with the IRS in reaching a settlement for your back taxes and possibly reducing the overall amount of tax owed.
Generally, this involves an agreement of a tax payment plan between the IRS and the tax payer.
More tips on filing taxes with the IRS:
Avoid unnecessary delays in filing taxes because this only increases the interest added as penalty and making the overall amount owed in unfiled taxes significantly higher.
Remember it is never too late to file a tax return!!! Even if the IRS has completed a Substitute for Return form regarding you, it is still possible to file for IRS back taxes.
It is best to get the assistance of a tax professional that can both file and reduce the amount of IRS back taxes owed by the tax payer. It is better to enlist the services of a qualified and reputable tax professional such as a tax accountant or tax attorney. This is because they are experienced in handling similar tax situations and are often better able to reach tax settlements with for your back taxes owed to the IRS.
There are Tax codes by the IRS that are important for any tax payer to know and understand:
· Assessments made by the IRS can be adjusted and sorted out once the filing of the missing tax returns are done by the tax payer.
· The IRS is also known to estimate what a tax payer's liability is.In this scenario, the IRS will notify you of the assessment they have made regarding your taxes or even have a tax return filed on your behalf. If this happens, it is important that you see a tax professional immediately for assistance. The tax professional can help you file your back tax returns to the IRS and this will change or revoke the IRS assessments. This is important to do as soon as possible so that they do not start the collections procedures on you.
· There are stringent time limits that the tax payer has to adhere to in order to get a tax refund. There are also time limits for tax debts and tax returns. If there is any confusion regarding a tax return or other issue, it is best to seek the help of a qualified tax professional.
· It is important for the tax payer to be aware of the IRS Statute of Limitations since all tax return filing is affected accordingly by this.
· The IRS is allowed to place interest and penalties on back tax liabilities that are not completely paid off by the tax payer in the allotted time span of the tax return. It is best to complete the payments of the tax liabilities before the deadlines when dealing with a tax return.
· It is important to understand how interest and penalties are configured by the IRS. If you have any confusion, seek the help of an IRS tax professional.
· Tax information is always confidential regardless of who the tax payer is.
- Tax professionals are not allowed to share your tax information with any outside party including the IRS itself without the consent of the tax payer involved. The tax payer must be very clear if they wish to share any information.
Final tax tips for filing tax returns with the IRS:
· It is often convenient to use computer software specially designed for filing taxes when preparing tax returns. It is not possible to file electronic tax returns so this is more to organize your tax return information.
· It is best to mail all tax returns by Certified Mail and in separate envelopes according to the proper tax return.
· This way there is proof that all of the appropriate tax returns were filed and received by the IRS. Also when your returns are sent in separate envelopes, it is more organized for the IRS so there are less chances of errors.
· If you are short on time, then personally deliver the returns to an IRS office near you.
· Always photocopy each page of every tax return and keep the copies as a record for the future.
· Also have the photocopies stamped by the IRS agent to keep for your records in case of any future discrepancy. This is important since this is evidence that you filed your returns and that they were received by the IRS.
