How to File Taxes If You Haven’t Filed in Years

It is common for individuals to have unfiled tax returns for several years. While daunting, this problem has clear solutions. Addressing unfiled taxes proactively prevents significant issues and brings you back into compliance. This guide provides a step-by-step approach to navigate filing past due returns, ensuring you have the necessary information for a successful resolution.

Determining Which Years to File

The Internal Revenue Service (IRS) expects taxpayers to file all required income tax returns. While there isn’t a strict limit on how far back the IRS can assess taxes if a return was never filed, they typically focus on the most recent six years for enforcement. If no return was filed, the statute of limitations for assessment does not begin, allowing the IRS to pursue collection indefinitely.

Taxpayers due a refund have a specific time limit. You generally have three years from the original due date to claim it. For example, a 2021 tax year refund, due April 18, 2022, could be claimed until April 18, 2025. Failing to file within this three-year window forfeits any refund amount.

Even without an anticipated refund, filing all unfiled returns is advisable. Voluntary compliance often results in a more favorable outcome than waiting for IRS contact. Addressing all past due years ensures your tax record is complete and accurate, avoiding future complications and allowing proper calculation of liabilities or refunds.

Gathering Required Documents

Gathering necessary documentation for past tax years is a crucial step. You need records of income, deductions, and credits for each year. Common income documents include Forms W-2, 1099-NEC, 1099-MISC, and various 1099s for interest, dividends, and retirement distributions. Schedule K-1s and records of capital gains or losses are also necessary if applicable.

For deductions and credits, you need documents like mortgage interest statements (Form 1098), property tax records, student loan interest statements (Form 1098-E), and charitable contribution records. If documents are missing, the IRS offers wage and income transcripts, providing information reported by employers and other payers (W-2s, 1099s). Request these online, by mail (Form 4506-T), or by fax.

Contacting former employers or financial institutions can yield copies of lost W-2s or 1099s. Many employers retain payroll records and may provide duplicates. Reviewing old bank statements can help reconstruct income and expense information if official forms are unavailable, as they often show deposits or deductible payments. These statements are valuable for approximating figures when other documentation is missing.

Preparing Past Due Tax Returns

After gathering all relevant documents for each unfiled year, accurately complete the tax returns. Obtain correct tax forms and instructions for prior years from the IRS website. Use specific forms applicable to the tax year, as tax laws and forms can change annually.

While tax preparation software is widely used for current returns, its utility for older tax years is limited. Most commercial software supports only the current year and the two preceding years for e-filing. For older returns, e-filing is typically not an option; you will need to prepare paper returns. Some desktop versions may handle older years for preparation but often require manual updates and do not support electronic submission for very old returns.

For complex situations or multiple unfiled years, engaging a qualified tax professional is beneficial. CPAs, Enrolled Agents, or tax attorneys possess expertise in tax law. They can accurately prepare returns, identify deductions and credits, navigate intricacies, and assist in understanding penalties and strategizing submission. Their knowledge is valuable in minimizing tax liabilities and ensuring compliance.

Submitting Unfiled Tax Returns

After preparing completed tax returns for all past due years, submit them properly to the IRS. Each tax year’s return should be a separate, complete package. Mail each year’s return in its own envelope to the appropriate IRS service center. The correct mailing address depends on your location and return type, found in tax form instructions or on the IRS website.

Physical mailing is almost always required for past due returns, as e-filing is generally limited to the current and two preceding tax years. For older returns, paper submission is the only method. To ensure receipt and proof of mailing, send them via certified mail with a return receipt requested. This provides a verifiable record of when your returns were sent and confirmation of delivery.

Retain copies of everything sent to the IRS for your records, including prepared returns, supporting documents, and proof of mailing. Processing time for mailed paper returns varies significantly, often taking weeks or months. While waiting, check your IRS account transcript online to see if the returns have been processed.

Managing Any Outstanding Tax Obligations

Once past due returns are filed, the IRS will process them. You may owe additional tax or be due a refund. If a tax liability is determined, you may face penalties.

The failure-to-file penalty is 5% of unpaid taxes per month (capped at 25%). A separate failure-to-pay penalty is 0.5% of unpaid taxes per month (capped at 25%). Interest also accrues on underpayments from the original due date until paid, with rates changing quarterly.

The IRS offers several methods for paying outstanding tax balances. You can pay directly from your bank account via IRS Direct Pay, or through Electronic Funds Withdrawal when e-filing (limited for prior years). Credit or debit card payments are also available through third-party processors, typically incurring a fee. Alternatively, pay by check or money order, payable to the “U.S. Treasury,” mailed with Form 1040-V.

If you cannot pay the full amount immediately, the IRS provides payment options. A short-term payment plan grants up to 180 additional days to pay, though interest and penalties accrue. An installment agreement allows monthly payments for up to 72 months. You can often apply online for an installment agreement if you owe under $50,000 in tax, penalties, and interest.

For significant financial hardship, an Offer in Compromise (OIC) might be an option. An OIC allows taxpayers to resolve their tax liability for a lower amount. The IRS considers your ability to pay, income, expenses, and asset equity when evaluating an OIC. It is generally granted when there is doubt as to collectibility, liability, or for effective tax administration reasons. Communicate with the IRS if you cannot pay, as ignoring the debt can lead to severe collection actions.

Sources

https://www.irs.gov/individuals/get-transcript
https://www.irs.gov/forms-pubs/about-form-4506-t
https://www.irs.gov/payments/failure-to-file-penalty
https://www.irs.gov/payments/failure-to-pay-penalty
https://www.irs.gov/payments/online-payment-agreement-application
https://www.irs.gov/payments/offer-in-compromise