If you owe back taxes, submitting your tax return may be the easiest option to resolve the situation. Technically speaking, the Internal Revenue Service (IRS) does not exactly force a statute of limitations regarding the amount of time you may file tax returns that are behind schedule. This can be done at any time, and the Internal Revenue Service will not reject your return; however, if you wish to put forth a refund claim for a particular tax year you can only do this for up to three years, and the IRS may take action after six years have passed. In order to regain command of your back taxes, you should follow the following actions.
Key Takeaways
- Back taxes are tax returns that you must file for prior tax years but have not done so.
- There is no time restriction on when you must submit back taxes; however, if you take over three years, you will forfeit any potential return that you may have been entitled to receive.
- The Internal Revenue Service (IRS) will definitely notice eventually if you got income in the span of those missed years.
- It is not possible to file back tax returns electronically. You can create your returns with the help of tax software, but the Internal Revenue Service requires that you print and send them in via regular mail.
There is a grace period of six years for back taxes filing, but only three years to get a refund
To be in "good standing" with the Internal Revenue Service (IRS), you need to demonstrate that you have submitted tax returns of the preceding six years. In addition, you must file your taxes within three years of the year in which you paid taxes to be eligible for a refund for that year. While there may not be a specific time restriction on how many years you have to file back taxes, the Internal Revenue Service prefers that you submit them as soon as possible rather than waiting until the last minute. If you put off filing your taxes for an excessive amount of time and made any money in the duration of the year, the Internal Revenue Service (IRS) will eventually step in and submit a replacement tax return on your behalf. They won't be concerned with claiming deductions or tax credits to which you may be entitled, even if you do qualify for them. A basic tax return will be constructed for you if you do not have them, which means that you will most likely come out owing more money than you would have owed originally. This is not likely to be in your best interest. The IRS will give a warning to you in advance of this happening. You will be sent a Notice of Deficiency CP3219N, which will provide you with a window of ninety days during which you can either prepare the overdue tax return on your own, including all of the credits and deductions or file a petition with the Tax Court in order to dispute your case.Which Tax Documents Am I Required To Have In Order To File My Back Taxes?
For the tax years you did not file, you will need to compile as many related tax records as possible. Suppose you are missing tax documents from a prior year. In that case, you can reach out to the institution or your employer responsible for sending them to obtain copies from the Internal Revenue Service (IRS) by filing Form 4506-T. It is important to always remember your present or previous employer and other businesses may no longer have these records, or they may be difficult to get. You will need specific tax returns and forms for that tax year and Forms W-2 and 1099 for money you gained during the year. At a bare minimum, you will require these forms. For instance, it is impossible to use a 2021 Form 1040 to declare income earned in 2019. Obtain supporting evidence of anything you spent money on that year which would be tax-deductible.What Are My Options for Filing and Paying My Overdue Taxes?
Some software packages can assist you with your taxes and are free to use. If you intend to handle the preparation of your own tax returns, you should look for software that is both dependable and simple to operate. It would be best if you prepared to spend some time on each tax return. Again, double-check that the software and paperwork you are using are proper for the tax year in question. The regulations change yearly, and the choices you choose for your program could be crucial to your compliance and the number of your obligations or refund. If you hire a tax professional, they will be able to assist with more sophisticated tax compliance. This will likely result in a better outcome for you. If you plan to hire a professional, your first step should be to look for someone who has a large amount of experience in preparing back taxes. In order to properly file back tax returns, you will need to print them out and send them in by mail to the Internal Revenue Service. It is not possible to accomplish this online.Taking Care of Financial Obligations and Obtaining Tax Refunds
It is not too difficult to pay any taxes that are owed on a return that has been completely filled out. The Internal Revenue Service (IRS) won't make the procedure difficult for you. You can pay the IRS online using your bank or savings account through the Direct Pay website, and the IRS also accepts payments made using credit cards. It is crucial to constantly be mindful of the time constraints for requesting refunds, conducting audits, and collecting debt. Your tax refund will typically "expire" three years after. On the other hand, if you are under the obligation of additional tax debts your refund is often allocated to cancel out that debt rather than being given to you. Suppose tax responsibilities are not paid fully by the due date. In that case, the Internal Revenue Service (IRS) may and will apply penalties and interest on those tax liabilities.An Installment Agreement
It would be best if you had tax debt to the IRS of less than $50,000 in order to qualify for an installment agreement, which can get you almost 72 months to make your payments. If the amount that you owe is lower than that, you can submit a request online for an installment agreement. If what you owe comes up to less than $10,000, your request will very certainly be granted on its own without further review. Regardless of the amount of tax you still have to pay, you can submit an Installment Agreement Request using IRS Form 9465 and your tax return. Unless you believe you can pay off your obligation in less than 180 days, the Internal Revenue Service will charge you a fee. Although there are no fees associated with this payment plan, it is possible that you will still need to pay the interest and any other relevant penalties.A Compromise or Offer to Settle
A compromise offer is somewhat more difficult to understand. It entails coming to a concensus with the Internal Revenue Service to pay an amount that is less than the total amount that is owed. You will normally only be granted approval for this if you cannot pay the debt through installments. There is also a charge associated with the application process. If you choose to pursue this course of action, you should enlist an expert's assistance. You need to provide evidence that you are not able to pay off your debt through any method.How to Prepare in Advance to Make Up for Overdue Taxes
Filing your tax return on time every year is the most effective approach to prevent having to pay back taxes. Spend some time thinking about your total tax status in order to generate ideas for how you might lower your tax liability and move closer to attaining your monetary objectives. If you believe that you will owe money to the Internal Revenue Service when you submit your tax return, you might consider making advance tax payments. These are typically expected of sole entrepreneurs, as opposed to employees who are susceptible to having money withheld by their employers. You may be able to avoid getting penalties on future tax returns by making anticipated tax payments on a quarterly basis.Filing Back Tax Returns
There is a possibility to complete overdue tax returns using software available online or working alongside an accountant. Still, in either case, the forms will need to be printed out and mailed to the Internal Revenue Service. You should send your past tax returns to IRS in individual envelopes and use certified mail to send them. This will ensure evidence that the IRS has gotten every single tax return. Sending them in individual envelopes will help ensure that the Internal Revenue Service does not make any administrative mistakes while processing them. The Internal Revenue Service requires approximately six weeks to process back tax returns.How Long Does the IRS Have to Collect Past-Due Taxes?
When it comes to tax collection, the Internal Revenue Service has statute of limitations of ten years. However, if you have never filed a tax return, the Internal Revenue Service has no specific limit of time on how much time it has to seek taxes you owe. Only tax returns which are submitted are considered for consideration by the statute. If the IRS believes that your return is related to a case involving either civil or criminal fraud, there is no time restriction on how long it has to collect any back taxes owed.Frequently Asked Questions (FAQs)
Can back taxes be filed using the online filing system?
You might be able to put together your past tax returns by employing software that is accessible online, and you might even be allowed to submit them electronically. However, if your software is not approved for the Modernized e-File (MeF) system, you will normally be required to print a return for back taxes. This is the standard procedure.How can I determine if I have an outstanding tax liability?
The IRS won't take very long for them to let you know about any money you owe them. If you do not pay your taxes in full, the Internal Revenue Service (IRS) will start sending you notices in the mail. In addition, you can get directly in touch with the IRS.