I Haven’t Filed Taxes in Years. What Should I Do?

If you haven’t filed taxes in years, taking proactive steps can help you navigate this process and resolve your tax obligations. Addressing unfiled tax returns is an important financial responsibility that can prevent significant issues. This guide outlines the steps to get back on track with your federal and state tax filings.

Understanding the Consequences of Not Filing

Not filing federal income tax returns has several consequences. The Internal Revenue Service (IRS) imposes penalties for late filing and unpaid taxes. The failure-to-file penalty is typically 5% of the unpaid taxes for each month or part of a month a return is late, with a maximum of 25% of your unpaid tax. If your return is more than 60 days late, a minimum penalty also applies, which is the lesser of $510 (for tax returns required to be filed in 2025) or 100% of the tax owed.

A separate failure-to-pay penalty is 0.5% of the unpaid taxes for each month or part of a month that the tax remains unpaid, up to a maximum of 25%. If both penalties apply in the same month, the failure-to-file penalty is reduced by the failure-to-pay penalty, resulting in a combined maximum of 5% per month. Interest also accrues on unpaid taxes and penalties from the original due date until paid in full, compounded daily, currently at 7% per year for individuals.

If you don’t file, the IRS may prepare a Substitute for Return (SFR) on your behalf. An SFR is based only on income information reported to the IRS by third parties, such as W-2s and 1099s. SFRs don’t include deductions, credits, or exemptions you might be eligible for, often resulting in a higher tax liability than if you filed your own return. The IRS may then proceed with collection actions based on this overstated tax bill.

Steps to Prepare Past Due Tax Returns

Gathering necessary information is the first step in preparing past-due tax returns. You will need income statements like Forms W-2 from employers and Forms 1099 for various types of income, such as independent contractor work, interest, or dividends. If you no longer have these documents, you can request copies directly from the payers or obtain them from the IRS.

The IRS offers tax transcripts to reconstruct past tax information. You can request a “Wage and Income Transcript” to see information from Forms W-2, 1099, 1098, and 5498 that were reported to the IRS. A “Tax Account Transcript” provides basic data about your tax return, including marital status, adjusted gross income, and payment types. These transcripts can be obtained online through the IRS website, by mail using Form 4506-T, or by phone.

Beyond income details, gather records for any eligible deductions or credits. This includes receipts for deductible expenses, records of charitable contributions, and information related to education or healthcare credits. Even without original documents, it may be possible to reconstruct these records using bank statements or other financial records. Determine the correct tax forms for each unfiled year, as forms and laws change annually.

Once information is compiled, begin preparing your returns. Options for preparing prior-year returns include using tax software designed for previous tax years or engaging a professional tax preparer. While tax software guides the process, a tax professional offers personalized advice and ensures all eligible deductions and credits are claimed, especially for complex situations.

Submitting Your Past Due Returns

After preparing your past-due tax returns, the next step is submission. For most prior-year returns, e-filing is not an option; you’ll need to print and mail forms to the IRS. Mail each tax year’s return in a separate envelope to avoid processing delays. Keep copies of everything submitted, including signed returns and supporting documentation.

If you owe taxes, several payment options are available. You can pay the full amount due, which stops further penalties and interest from accruing. If paying in full isn’t feasible, the IRS offers payment plans. A short-term payment plan allows up to 180 additional days to pay your balance in full, provided you owe less than $100,000 in combined tax, penalties, and interest.

For those needing more time, an installment agreement allows monthly payments for up to 72 months. To qualify, individual taxpayers typically need to owe $50,000 or less in combined tax, penalties, and interest, and must have filed all required returns. An Offer in Compromise (OIC) allows certain taxpayers to settle tax debt for a lower amount than originally owed. An OIC is considered if you cannot pay your full tax liability or if doing so would create significant financial hardship. Eligibility for an OIC requires all required tax returns to have been filed.

If a refund is due for past years, you must file the return within three years from its original due date to claim it. If you file past this deadline, you may forfeit the refund. Penalties for failure to file or pay are not assessed if a refund is due.

Addressing Unfiled State Taxes

Unfiled state income taxes require separate attention from federal obligations. State tax laws and filing requirements are distinct from federal ones, and each state has its own set of penalties and interest charges for non-compliance. Many states impose failure-to-file and failure-to-pay penalties similar in structure to federal penalties, often calculated as a percentage of the unpaid tax per month.

The process for addressing unfiled state returns often mirrors the federal process. Contact the relevant state tax agency to determine requirements for obtaining past income information and necessary forms. Many states can obtain income data from federal records, simplifying the process of reconstructing your tax history. States may also have their own programs or pathways for taxpayers to become compliant, which could include penalty abatement options.

While specifics vary by state, the general approach involves preparing unfiled returns, calculating any tax due, and submitting them according to state instructions. Some states may offer amnesty programs that allow taxpayers to file past-due returns with reduced penalties for a limited period. Proactively addressing unfiled state taxes can prevent collection actions such as wage garnishments or property liens, which states can pursue for unpaid tax debts.