Unfiled Tax Returns
Unfiled tax returns? IRS help for non-filers
IRS enforcement actions for non-filers
The good thing is you are not alone. There are many taxpayers that get behind, intend to file, but never get around to it. Some taxpayers just give up and hope the problem goes away. This is not the best solution.
The IRS considers unfiled returns a high priority problem with approximately 5 million non-compliant taxpayers. This of course costs the IRS millions in uncollected tax. In response, the IRS has set in place specific programs to find and notify non-filers to file their tax returns.
I can’t remember if I filed or not–IRS notices
It sounds strange, but it is quite common that taxpayers cannot remember which returns they have filed or have not filed. Many times, the return is prepared, but simply not filed by the taxpayer or by his or her tax preparer. You will usually receive notice from the IRS pretty soon. The IRS starts by notifying you at your last address on file that you are missing a certain return. Further notices are sent if you do not respond. If you never respond, they will likely prepare the returns for you. These are called Substitute Returns or SFR.
It is important never get to this point because when the IRS prepares substitute returns, they do not take into account the deductions available to you. The consequence is that tax debt is assessed to you based upon that return. If a substitute return is prepared for you, correct it by filing your own return taking all the deductions available to you.
Compliance and filing back tax returns–how far back do I go?
Sometimes substitute returns are not prepared by the IRS. If you are constantly in fear of what the IRS will do once you get on their radar, file for the years that are unfiled.
A common question that always comes up is: How far back do I file? The answer really depends on your case, but generally three to six years. If there is wage and income attributed to you for years prior to that and you have an IRS filing requirement, you need to file for those years as well. If no income is attributed to you and you have no tax debt, no fling is necessary.
The process of preparing unfiled tax returns
Many taxpayers think it is too hard to compile records from the past, but just take it step by step. It can be done!
Compile your income. Do your best to obtain all records of your income:
- retrieve past 1099’s and/or W-2’s. If lost or thrown out, contact your employer or their payroll department for records. They usually hang on to these for seven years.
- get copies of bank statements showing deposits to show your income
- call the IRS for a wage and income statement for those unfiled years. If they do not have these, ask them for an income report record of all third parties that have reported to the IRS.
- calculate your expenses. You should to the best of their ability reconstruct what you think your expenses were for each year by using a monthly average for each of the years. For example, calculate one month of your rent/mortgage and all expenses for the month and multiply that number by 12. Expenses should coincide with the reasonable expenses of living in your area.
Once your tax return is prepared, file it at the nearest office near you by looking on the IRS website, IRS.gov. If you owe taxes that you cannot pay in full, there are options to resolve the tax debt, including an IRS payment plan or offer in compromise. Consider hiring a tax attorney to assist you with the entire process to ensure it is completed properly. Please call for a no-cost tax attorney consultation at (619) 639-3336.
This blog post is not intended as legal advice and should be considered general information only.