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14 Tips if You Haven’t Filed Taxes in Years

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In a Nutshell

If you haven't been filing your federal income tax returns, it's a good thing you’re here! If you haven't been filing your tax returns for years, you could avoid a lot of trouble with the IRS by filing these old returns. This article will discuss why you should file your unfiled tax returns along with tips for the best way to file these old returns.

Written by Attorney John Coble.  
Updated June 7, 2021


If you haven't been filing your federal income tax returns, it's a good thing you’re here! If you haven't been filing your tax returns for years, you could avoid a lot of trouble with the IRS by filing these old returns. This article will discuss why you should file your unfiled tax returns along with tips for the best way to file these old returns.

1. You Need To File Your Tax Returns To Avoid Civil Penalties And Criminal Prosecution

Are you required to file a tax return? As a general rule, you aren't required to file a tax return if your income is less than your standard deduction. However, there are many exceptions to this rule, such as when you have self-employment income. The easiest way to determine whether you need to file a tax return is to use the IRS Interactive Tax Assistant. After completing the questionnaire, it will let you know if you're required by the tax law to file a tax return.

If you're required to file a tax return and you don't file, you will have committed a crime. The criminal penalties include up to one year in prison for each year you failed to file and fines up to $25,000 for each year that you fail to file. Lucky for you, the IRS rarely uses criminal prosecution against taxpayers. The IRS doesn't have the resources to criminally prosecute every non-filer. So, when it uses the criminal laws against a taxpayer, they make sure it's for a high-profile reason or there's a large tax debt involved. In this way, the prosecution gets maximum coverage. Other taxpayers see these prosecutions unfold and it motivates them to file their taxes to avoid going to jail.

While the IRS seldom uses criminal prosecution to enforce taxpayer obligations, it always uses civil penalties. If you fail to file your taxes, you'll be assessed a failure to file penalty. This penalty is 5% per month for each month you haven't filed up to a maximum of 25% over 5 months. If you failed to pay, you’ll also have 1/2 of 1% “failure to pay penalty” per month assessed against you. This penalty could also rise to 25% over 50 months. Interest accrues on your unpaid taxes, penalties, and the interest is assessed on the accrued interest itself.

2. The Statute Of Limitations For The IRS To Audit You Begins With The Date The Return Is Filed Or The Due Date – Whichever Is Later

There's no statute of limitations on a tax audit for a tax year if you don't file your tax return. Statutes of limitations prevent enforcement of a law after a period of time passes. If you file your tax return, the statute of limitations prevents the IRS from conducting an audit of your taxes for a particular year after 3 years have passed since you filed that return. Theoretically, it could be 25 or 30 years later and the time limit will not have expired if you haven’t filed your return. But, when you do file a tax return, the general rule is the IRS can't audit or assess new taxes against you more than 3 years after the filing date or the due date - whichever is later. But, if you filed a tax return and understated income by more than 25%, the IRS has 6 years to audit and/or assess new taxes against you.

So, the quicker you file, the quicker the statute of limitations will run out for the IRS to assess new taxes against you and to audit your returns.

3. Don’t Forget To File Your State Returns

Every state that has an income tax has an information-sharing agreement with the IRS. Often, states are the first to notice you haven't been filing your state tax returns. Due to their agreements with the IRS, the states will alert the IRS to the fact that you haven't been filing your returns.

If you're curious about which states don't have an income tax, they are: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Washington. New Hampshire doesn't tax earned wages but does tax investment income.

4. If You Receive A 1099 Or W-2, The IRS Will Look For Your Tax Return

The Information Returns Program (IRP) is a very effective method of finding non-filers. If you receive an information return, like a W-2 or 1099, the IRS will try to match it to a tax return. The IRS receives a copy of the W-2s and 1099s you receive. If there's no return to match it to, they'll know you failed to file. Once the IRS knows you're not filing taxes, they'll start sending computer-generated inquiries about your failure to file. If you ignore these IRS notices, the IRS will get more aggressive.

5. If The IRS Puts You On The Spot By Asking You If You Filed Your Returns, Do Not Lie

Lying to the IRS is a crime punishable by up to 5 years in prison. If a revenue officer or other IRS agent asks you if you've filed your tax returns, it will put you in a tight spot. If you say you have filed your returns, you will have lied, which is a crime. If you tell the IRS you haven’t filed your returns, you've admitted to the crime of not filing your taxes. It's probably a good idea to tell the IRS you'll have to check and get back with them. Then, you may want to retain a tax professional, such as a CPA, attorney, or enrolled agent, to represent you before the IRS.

6. If You Don’t File Your Return, the IRS May File a Return for You

If you haven't filed tax returns, the IRS may file for you. This is called a substitute for return (SFR). When the IRS prepares an SFR, they will do it based only on the information available (which may cost you if you earned more in previous years and that is the only information that the IRS has to calculate your taxes due) and you'll only get your standard deduction. You could be married, but the IRS may prepare the SFR as if you're single. If you have big deductions available had you itemized, you will lose those since the IRS will only give you the standard deduction. This will leave the taxes due for an SFR much higher than they would have been had you filed your return on your own. 

You can still prepare your tax return after the IRS has filed an SFR. The IRS will usually accept your numbers in place of those on the SFR. If the IRS doesn't replace the SFR with your tax return, you can appeal that decision to the IRS Office of Appeals

7. If You File Several Years’ Tax Returns At Once, The IRS Isn’t Going To Arrest You

The IRS only uses criminal prosecution as a last resort. IRS policy isn't to prosecute those who file their returns before the IRS pursues criminal prosecution. If you're concerned about criminal prosecution, the IRS has 6 years from the day you failed to file a return to prosecute you. But remember, it is very rare that the IRS prosecutes individual taxpayers.

8. You Can Get A Transcript Of Your Old W-2 And 1099 Information From The IRS If You Can’t Find Your Copies

If you're preparing an old tax return, you're going to need your tax documents for that year. It's common for people to lose their old W-2s and 1099s. While you can't get copies of these old information returns, you can get a transcript of your account that will provide you with the information from these forms. The easiest way to get this transcript is to use the IRS Get Transcript site.

While your transcript will provide you with the reported income on your 1099s or W-2s, it won't provide you with unreported income. This unreported income would be money that you have received in the ordinary course of business, if you operate your own business. You must put this income on your return or you could be found guilty of tax fraud. Where do you find the information for this income? You'll have to look at your old business records and bank statements. The difficulty of compiling these old records is why it's especially important to prepare your tax return every year if you're self-employed.

9. You Must File Your Returns On The Tax Forms For The Appropriate Year

If you're filing a return for a prior tax year, you must use the appropriate form for that tax year. For example, if you're filing an individual income tax return for 2018, you can't use Form 1040 for 2020. You must use the 1040 Form for 2018. It's easy to get these old tax returns. The most convenient way to get the forms is to download them from the IRS Prior Year Forms part of the IRS website. Other ways to get the old forms include:

  • Picking them up at your local IRS office

  • Calling the IRS Forms Department at 800-829-FORM (3676)

  • Using various tax software programs

  • Contacting tax professionals, who usually have old forms

10. If You’re Liable For Penalties, Ask For A Penalty Abatement

When you file tax returns late, you'll always have penalties assessed against you. Tax returns for prior years will have a penalty of 25% of the taxes due just for failure to file. If you owed $10,000 in taxes, you'll have a penalty of $2,500 just for failure to file. How often do you spend $2,500 on anything? On top of the late filing penalty, there'll be a “failure to pay” penalty. These penalties are substantial additions to your tax bill. If you are successful in getting the penalty removed, the IRS will also remove the interest that accumulated on the penalty portion. It's a good idea to ask for penalty abatement.

The first basis for a penalty abatement that many taxpayers consider is the First Time Penalty Abatement program. This program is an example of the IRS's efforts toward effective tax administration. To qualify for this penalty abatement program, you must meet the following requirements:

  1. You didn't previously have to file a return or you had no penalty for the 3 tax years prior to the tax year where you received the penalty.

  2. You have filed all currently required returns or have filed extensions of time to file.

  3. You have paid or arranged to pay any tax due.

Besides the First Time Penalty Abatement Program, there are several other reasons you can request penalty abatement:

  • IRS written advice caused the error that led to the penalty. 

  • You're under a specific legal exclusion from the penalty. Disaster relief may qualify you for such an exclusion.

  • The IRS settles with you because they're at risk of losing litigation with you.

  • You have a reasonable excuse for the issue that caused you to incur the penalty. Examples of reasonable cause include: long-term illness, disaster, and loss of records (in some situations).

Even if you receive a penalty abatement, the failure to pay penalty will continue to accrue until you have paid the tax in full. For this reason, you may want to wait until the tax portion has been paid before you request penalty abatement. You can do this by filing Form 843. If you haven't fully paid the tax, you can request penalty abatement by sending a letter or through a phone call. The telephone may be the best way since you'll often have a decision on the abatement before you get off the phone. 

11. Get Your Return Filed Or You Could Lose Your Right To Claim A Tax Refund

You have 3 years from the due date of the return to file and claim a refund. In a normal year where April 15th falls on a weekday, this would mean you have until April 15th 3 years from that date to file and get your refund. But, you have until July 15 of 2023 to claim your 2019 tax refund. This is because the 2019 tax deadline - which would have been April 15 - was changed to July 15th because of the coronavirus pandemic. 

Similarly, the deadline to claim a refund for 2020 is May 17, 2024, since the 2020 deadline has been changed to May 17, 2021, because of COVID-19. If you file an amended return to get a refund, you have the same statute of limitations for the amended return as for the original return. If you got an extension to file your original return, you have three years from the date you filed the return. This assumes you didn't file late.

You may not know whether you have a refund due. But, if you had taxes withheld, you probably do have a refund due. Even if nothing was withheld, you may have money due through the earned income tax credit, the Affordable Care Act health insurance premium credit, the child tax care credit (this can be up to $300 per month per child now), or other refundable tax credits. 

There's no reason not to file to get your refund. There's no penalty when you're owed a refund. There's no threat of criminal prosecution for failing to file a return where you're owed a refund. The fact is, if you don't file to get your refund, you may as well be writing a check to the government for your refund. The money is yours, the government is just holding it for you. You probably need that money more than the government does.  

12. If You Can’t Pay The Taxes Due On These Late Returns, Set Up An Installment Agreement Or Settle With The IRS

The downside of filing a tax return is you may have to pay taxes you can't afford. The IRS has payment plans and settlement opportunities for people in your position. Do you think you're the first person that couldn't afford to pay their taxes? The IRS has a long history of dealing with taxpayers that can't pay and has developed solutions. These solutions include Offers in Compromise (OIC), Partial Payment Installment Agreement (PPIA), or Currently Not Collectable (CNC) status. In short, the IRS will work with you when you can't afford to pay.

13. Certified Mail May Not Be the Best Way To File Your Late Returns

You can file your old tax returns in several ways:

  • You can file in person at the local IRS office. If you do this, bring a copy of your returns that you will keep. Have the IRS time-stamp the receipt on the first page of each of your copies of the returns.

  • The most convenient way to file is electronically. With this method, you'll get an electronic receipt.

  • You can file by mail. If you use certified or registered mail with the return receipt requested, you will have proof that you sent something to the IRS. Unlike the first two methods mentioned above, you won't have proof of what you sent. For this reason, in-person filing or electronic filing is safer than filing by mail.

14. If You Need Help Preparing Your Tax Return, Hire A Tax Professional

Filing several years of back taxes can be a daunting task. It may be a good idea to hire a tax professional. If you have a difficult time affording a tax professional, the following programs may be able to help you:

  • The Volunteer Income Tax Assistance (VITA) is a program for lower-income taxpayers, those with disabilities, and taxpayers who have a limited ability to understand English. The Tax Counseling for the Elderly (TCE) program and AARP programs are for elderly taxpayers. While the VITA and TCE sites focus on preparing your taxes for you, the AARP sites focus on helping you prepare your own taxes. The IRS has free tools to find locations for these programs near you.

  • If you're in the military, the MilTax program may help you.

  • The IRS also has a partnership with certain tax software companies to provide lower-income taxpayers with free software to prepare their taxes and file their tax returns. Unlike the other programs that offer some professional assistance, this is a self-help program.

Let’s Summarize…

If you have failed to file tax returns for some years, it's a good idea to look into the situation and see about filing those returns. Doing so could save you a lot of money in the form of penalties and interest. In rare cases, it could prevent criminal penalties. On the positive side, you may even make some money out of the process through refunds. In 2019, the IRS reported it had $1.4 billion in unclaimed refunds. If the IRS owes you, don't wait too late to claim your money.



Written By:

Attorney John Coble

LinkedIn

John Coble has practiced as both a CPA and an Attorney. John's legal specialties were tax law and bankruptcy law. Before starting his own firm, John worked for law offices, accounting firms, and one of America's largest banks. John handled almost 1,500 bankruptcy cases in the eig... read more about Attorney John Coble

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