Failing to file taxes for multiple years can lead to serious consequences such as penalties, interest charges, and even legal action by the IRS. If you haven’t filed taxes in 5 years or more, it’s important to take action and get back into compliance with the IRS. Here’s what you need to know:
Assess Your Situation
Before taking any action, it’s important to assess your situation and determine the extent of your non-compliance. Gather any relevant tax documents such as W-2s, 1099s, and other income statements, and review your financial records to estimate your total income and deductions for each year you missed filing taxes.
File Your Tax Returns
The first step to getting back into compliance with the IRS is to file your tax returns for each year you missed filing. You can obtain the necessary tax forms from the IRS website or by contacting a tax professional. Be sure to include all relevant income and deductions and sign and date each return.
Address Any Outstanding Tax Debt
If you owe taxes for any of the years you missed filing, it’s important to address this debt as soon as possible. The IRS charges interest and penalties on unpaid taxes, so the longer you wait, the more you’ll owe. You can work with the IRS to set up a payment plan or negotiate an offer in compromise if you’re unable to pay the full amount.
Consider Hiring a Tax Professional
A tax expert may be useful if you’re feeling confused or overwhelmed about how to proceed. A tax expert or tax resolution/consultation services can guide you through the process of filing back taxes and can give you advice on the best way to handle any unpaid tax debt.
Keep Accurate Records Going Forward
Once you’re back in compliance with the IRS, it’s important to keep accurate records going forward. This includes keeping track of all income and deductions and retaining copies of tax returns and other relevant documents. This will help you avoid falling out of compliance in the future.
Be Prepared for Potential Consequences
Failing to file taxes for multiple years can lead to serious consequences, including fines, penalties, and legal action by the IRS. If you owe taxes for any of the years you missed filing, you may also face wage garnishment or seizure of assets. It’s important to be prepared for these potential consequences and take steps to address any outstanding tax debt as soon as possible.
Take Advantage of IRS Programs and Resources
The IRS offers several programs and resources to help taxpayers who have fallen behind on their taxes. These include installment agreements, offers in compromise, and penalty abatement programs. It’s important to be aware of these options and take advantage of them if they’re available and appropriate for your situation.
Consider the Impact on Your Credit Score
Failing to file taxes or pay outstanding tax debt can also have an impact on your credit score. If the IRS places a lien on your property or garnishes your wages, it could show up on your credit report and lower your credit score. This can make it harder to obtain credit in the future, such as a mortgage or car loan. It’s important to address any outstanding tax debt as soon as possible to minimize the impact on your credit score.
It’s crucial to maintain organization because filing back taxes and taking care of unpaid tax debt can be challenging processes. Make copies of all pertinent paperwork and keep track of all correspondence—including phone calls and letters—you have with the IRS. You may also want to consider creating a tax file for each year to keep track of all tax-related documents and receipts.
Avoid Falling Out of Compliance in the Future
Once you’re back in compliance with the IRS, it’s important to take steps to avoid falling out of compliance in the future. This includes making timely estimated tax payments if you’re self-employed, staying up to date on tax law changes, and seeking the help of a tax professional if you’re unsure about any aspect of your tax situation. By staying in compliance with the IRS, you can avoid the stress and potential consequences of falling behind on your taxes again in the future.
Failing to file taxes for multiple years can lead to serious consequences, but it’s never too late to get back into compliance with the IRS. By filing your back taxes, addressing any outstanding tax debt, and keeping accurate records going forward, you can avoid further penalties and legal action by the IRS. Don’t hesitate to seek the help of a tax professional if you’re feeling overwhelmed or unsure about how to proceed.