How Many Years Can You File Back Taxes?

Posted by Frank Gogol

Not everyone can file their tax returns. It requires quite some money, and sometimes, people just don’t have the necessary funds to do so. However, you can fileback taxes, and solve this situation with the IRS.  How many years can you file back taxes,though?

What Are Back Taxes?

Back taxes refer to taxes that haven’t been paid on time, respectively in the year that they were due, or they were paid partially. Back taxes are available for various kinds of taxes, including state, federal, and local ones.

Although it is possible to pay back taxes, they will accumulate interest as time goes by, and penalties will also apply. Not to mention that if you don’t pay back taxes, then there might be some legal action taken against you, such as wage garnishment, tax liens, or even prison time.

How Many Years Back Should I File?

“How many years can you file back taxes?”is a common question in the minds of taxpayers whodidn’t pay their taxes on time and are subject to back taxes. Well, the IRS policy statement has the answer to this question.

According to the IRS Policy Statement 5-133, Delinquent Returns – Enforcement of Filing Requirements gives a rule to those who are dealing with back taxes. Basically, taxpayers must file six years of back tax returns if they want their situation with the IRS to be good. Furthermore, the IRS management has to approve any type of rule deviation.

In some situations, the IRS managers may also require tax returns even further back than six years, but it depends on several factors. Some situations when the IRS will require returns from more than six years back include:

When Business Returns Are Involved – The IRS is aware that businesses have the biggest potential for non-compliance, which is why they closely scrutinize business returns.

When There Is a Large Potential Tax Bill on Older Returns – Some of the bad signs for this include property sales, large wages with no withholding, as well as Forms 1099-MISC.

When a Revenue Officer Is on the Case – In the event of a delinquent-return investigation, a local field collection personnel may be involved. The personnel will then perform an in-depth investigation on collection and non-filing.

Tax Documents You Need to File Back Taxes

Filing back taxes is possible by submitting certain documents. Here’s what you need:

Form 1040

The first thing you have to do is make sure you have all the tax forms for the year you need to file. Fortunately, the IRS website has what you need. You can simply access their website and obtain the tax forms by downloading them. There are different forms each year, so make sure you download the right ones for the years you need.

Form 1040 is one of the most important forms. It has been significantly revised by the IRS, which is why you need to make sure you’re downloading the right version. It is the main form for individual income taxes from 2018.

There is a new form that replaced the old versions for 1040, 1040EZ, and 1040A versions. Some information was removed from the form too.

Income Statements

You will also need forms that show your income for the tax year you’re filing. Therefore, you should make sure you have them when filing back taxes. For instance, for the year 2018, you will need any 1099s, W-2s, interest statements, and other types of income statements for that particular year.

This is why it’s best to make sure you always save documents like this in a records file so you don’t miss them. Luckily, even if you’re missing any information, you have the option to talk to the IRS and request a wage and income transcript for a previous year. This will give you the chance to find out information regarding the returns data for that specific year.

Documents for Tax Credits and Deductions

If you’re planning to claim tax credits or deductions, then you should have all the documents necessary for this process. These include receipts for the mortgage interest or medical expenses that you paid during the tax year, so they’re crucial to have.

3 Ways to File Back Taxes

There are three easy ways to file your back taxes:

Filing Back Taxes by Hand

This one is the more traditional method. You can download Form 1040 and then file it manually. If you also use the instructions the IRS provided, it will be even easier. When you’re done and have everything necessary, including the payment you owe, you can mail the form to the IRS.

Filing Back Taxes with Tax-Preparation Software

Another easy method is by using a tax software program to file back taxes. This is great for people who want some additional help when filing their back taxes. Software of this sort will give you some questions regarding your deductions and income. Based on your responses, 1040 will be filled out. Then, the software will file the form electronically on your behalf.

Filing Back Taxes with a Tax Professional

If none of the other methods work for you, you can try asking a tax professional to help you. The tax expert will work with you and help you fill out your back taxes, while making sure your refund is maximized.

Where Do I Send Back Taxes?

Back taxes you file on paper should bemailed to the local IRS Service Center. The IRS is the one responsible for back taxes, so they are handling the situation. It is also possible to use tax software to help file your back taxes, but you still have to print them out and mail them to the IRS. Look up the address of the local IRS Service Center and make sure your documents make it there.

Your returns should be mailed in separate envelopes, and then sent using certified mail. This will make it easy for you to get proof that your mail reached the IRS and each return made it to them. On top of that, if you send them in separate envelopes, it will be less likely for the IRS to make any clerical errors in processing them.

How Much Does It Cost to File Back Taxes

Filing back taxes can be done for free, but this is only possible if you make sure to complete the forms yourself. You only have to pay the amount you owe back, without any additional fees.

But if you are asking someone else to help you with tax preparation (i.e, a tax expert), then there will be some fees that you’ll have to handle.

Be wary that there might also be somepenalties that apply, and you will have to pay interest if you did not pay your taxes on time.

What If I Can’t Afford to Pay My Back Taxes?

If you owe back taxes to the IRS and cannot pay them, there are still some things that you can do. It all depends on how much you owe and what method you prefer.

You can try installment agreements, particularly if you require more than 72 months to pay your debt, or you have a higher sum than $50,000 that you have to give to the IRS. As such, you can try a Collection Information Statement that is sent to the IRS, as it helps analyze your assets, income, and expenses.

Then, there will be an estimation on how much you’re able to pay regularly. Therefore, if you can only pay $500 a month after dealing with all your necessary expenses, you will only pay that amount under the installment agreement.

You can also try offering in compromise. If you cannot pay all the back taxes you owe, then you can pay the IRS only a percentage of that amount. After you pay that sum, the remaining debt can be forgiven.

Of course, this is only possible if you file some forms. 433-B will be required for businesses and 433-A will be required for the self-employed. Form 656 will be necessary as well. This method is not always a guarantee, though, as the IRS will not accept every offer unless the person filing all the forms qualifies.

You can also try a Currently-Not-Collectible status, which means that you are unable to pay the taxes as they are too much for your current income. Besides, you may not have assets that are able to repay the whole debt.

Under CNC status, you can rest assured the IRS will not take any action against you, while you don’t have to pay anything towards your debt. Conversely, interest will continue to accumulate, but at least you will not have to worry that you will have problems with not paying your taxes.

Another method you can try is Online Payment Agreements. With this, you can set up a payment for every month, based on the amount you have to pay back. Of course, the debt should be paid in full within 72 months. This method is for people who owe $50,000 or less in income tax if they are individuals, and $25,000 or less in payroll tax if they are businesses.

Can I Still Get a Refund from Filing Back Taxes

You can stillget a refund from filing back taxes, but only if you do it within three years. Usually, you have three years to claim a refund, which starts with the original filing deadline. After this period is over, the IRS will not be able to give you the refund check, as the refund has expired.

Tips for Filing Back Taxes

Do you have to file back taxes? Here are some tips to help you out:

1. Confirm that You’re Only Going Back Six Years

You will have to contact the IRS or a tax professional by calling them. Using a dedicated hotline, you will have to confirm to them that you only have to go back sick years for some of your unfiled taxes.

2. You Won’t Get Old Refunds

You should keep in mind that the IRS will not give back your old refunds. It’s only possible to claim these refunds as long as you filed within three years of the due return date. Everything before that amount of time is lost, which means that collecting the return will be impossible.

3. Transcripts Help

When filing back taxes, you have to prepare an accurate return that matches your IRS records. So, make sure to request your income and wage transcripts from the IRS, and then trace your income history. Otherwise, the IRS will start to suspect that your return may not be accurate. Make sure to ask for transcripts so you can check the amount you may have paid for estimated tax payments that you can credit to the tax balance you owe.

4. Beware of Penalties

Don’t forget that some fees or penalties apply if you didn’t pay anything in years. These penalties can be incurred like failure to file and to pay.

5. Request Penalty Abatement

You can tell the IRS if you have any financial struggles and they will understand, and may not charge you a failure to pay or to file penalties on balance-due terms.

6. The IRS May Have Filed a Return for You

In some cases, the IRS may use something known as the substitute for a return for three years after the due date of the return. If you file a return to a replacement for the substitute of return, the IRS will closely scrutinize the replacement return and make a comparison with the information statements on file. This may take months to unfold.

7. Delinquent Returns May Need Special Processing

In case you have any substitute for return in your past or delinquent-return notice, it will be necessary to file the return with certain IRS units. This will make special processing possible.

8. You Can Set Up a Payment Agreement with the IRS

It’s possible to set up a payment agreement with the IRS if you owe money and cannot pay it back immediately.

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Conclusion

If you owe taxes to the IRS, it’s essential to know how many years you can file them back. We hope this article was helpful in this regard and now you can put your taxes in order.

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