What to do when you have ‘Unfiled Tax Returns (Back Filing)’?

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You would be aware that every adult in the USA is required to file taxes every year by the 15th of April. There are times when for some or other reason you are unable to do so, and end up with “unfiled tax returns”. What do you do when you find yourself in such predicament?

The IRS (Internal Revenue Service) levies penalties and fines on individuals who are found skipping filing their income tax. The longer the period of “back filing” the higher the penalty will be. It is highly recommended that you file your income taxes regularly, i.e. every year. In cases when you have not, you need to take immediate steps to get up to date with the IRS. Here are a few steps that will take you through the process:

1. Put your facts together – if you have not filed for years, it is important to find out the facts. Call and speak to a representative at the IRS at 1-866-681-4271 and get the pertinent information. Request the IRS rep for:

• Form 4506-T (this will take about 45 days to reach you)
• Transcript of Tax Return (this will give you data that will help filling in the W2s, 1098s and 1099s)

2.Ensure you use the right forms – you need to file your income tax returns using relevant forms or your filing will be invalid. Do not file past years’ returns on present year form. Download the relevant forms from the IRS website, or visit the office and ask for the relevant forms.

3. Fill in the information carefully – you need to be careful to fill in the information according to the laws applicable during the year for which you are filing. If you find it confusing and difficult, you could choose to use either a good income tax filing software program or the services of an income tax professional. Both can cost you – but often it is worth every cent. This is because it will not only save you time and money, but it will also ensure that everything is done well. A tax professional will be able to advise you on how to file your returns in such a way that will minimize some of the fees that you may have to pay.

4. Remember to file the state back taxes as well – if you missed out on the federal taxes, it is most likely you missed out on filing the state taxes as well. Contact the Comptroller’s Office or look up the website of your state. Be careful you file the returns using the correct year’s forms.

5. You have payment options – contrary to common belief, you need not pay all you owe to the IRS in one go. Talk with the IRS representative and determine how much the minimum acceptable payment is, so you could start payment and stop the fines and penalties. Try paying the maximum amount you can because back taxes have interest on the outstanding balance– and the longer you stretch the payment period could cost you more money.