What to do when you have years of unfiled tax returns…
Like many individuals, you may have not filed a tax return because you were not able to pay. This led to not filing the next year, and then the next. So is the cycle that plagues many taxpayers in the United States. Fear of an overwhelming tax debt and not being able to pay the IRS leads to years of unfiled tax returns. As the years pass, additional interests and penalties accrue and before you know it, the original tax debt that you couldn’t afford has now grown substantially. How will you ever be able to resolve the tax liability and resolve years of unfiled tax returns?
Unfiled Taxes
First and foremost, you must be aware that the only way you can satisfy your tax issue and return to good standing with the IRS is to file all tax returns and pay the tax liability. Once you fall in to the cycle of unfiled returns, even if you are currently owed a refund, you will not receive it as it will be applied to your past due tax obligations. However, if you file and resolve the tax debt, you will be able to get back on track.
To file your tax returns you will need to obtain the actual forms for the years that you need to file and hopefully collect all of the financial history to show income as well as any eligible deductions, credits or claims that may reduce the amount that you owe. When you don’t file a return, the IRS will create a substitute return based only on the information that they have. This will not likely include any deductions, so you will be assessed the full amount of your liability based on your income. Once you file the return, they will correct the return and make necessary adjustments. If you have no supporting documents to help you complete the return, all is not lost. Your tax attorney or a CPA that specializes in filing unfiled tax returns will be able to walk you through every step of the process.
Once you have filed the tax returns, the IRS will make the needed adjustments and provide you with your total tax liability. If you can, you will want to pay this amount in full as soon as possible. If you can’t afford to do that, you may be able to use one of the following actions to resolve the debt:
• Installment Agreement – this allows you to pay off the liability over time using monthly installments.
• Offer in Compromise – this allows you to reach a settlement agreement, possibly for less than you owe, by negotiating a lump sum payment.
• Declaration as Uncollectible – sometimes if the IRS determines that you have no ability to pay the debt, your account will be declared as uncollectible and they will cease, even if temporarily, any collection action against you.
The best thing to do is to get help from a certified tax professional that specializes in back taxes and take care of your years of unfiled tax returns immediately. Work with the tax professional to develop the best strategy to get you back on track with the IRS and settle your tax debt.
Unfiled tax returns
