That might sound convenient, but it ‘s rarely beneficial. Whenever possible, you ‘re better off filing back taxes on your own ( or with the aid of a certified tax professional ). Below, we ‘ll explain the benefits of getting caught up on your back taxes and how to file them .
Benefits of Filing Back Taxes
Getting caught up on your tax filing obligations offers several advantages.
Reading: Why and How to File Back Taxes
Claim a Tax Refund
If you have n’t filed a tax restitution and the IRS owe you money, you have a limited number of years to claim your refund .
In most cases, you have three years from the tax return ‘s original due date to file a reappearance and claim a refund. If you miss that window, your refund becomes property of the U.S. Treasury .
Avoid a Substitute for Return (SFR)
If you have n’t filed a tax reelect in years, the IRS can prepare an SFR on your behalf and send you an bill for the tax it says is due. The problem is, while the IRS gets copies of 1099s and W-2s report your income, it does n’t have much information on your deductions. For exemplar, suppose you gave money to charity, had deductible business expenses, and paid for freelance health indemnity. The IRS does n’t have that information, so those deductions are left off entirely .
As a resultant role, it ‘s about guaranteed that you ‘ll owe more with an SFR than you would if you prepare your own tax retort ( or get serve from a professional ) .
Avoid IRS Collection Actions
The IRS has collection powers that many early debt collectors do n’t have. If you do n’t file a tax return key and pay the tax you owe, the IRS can garnish your wages, levy your bank bill, position a tax spleen on your home or other place, and tied revoke your recommendation .
typically, the IRS is willing to work with taxpayers who make an attempt to get caught up on their tax file obligations. therefore, filing back taxes may help you avoid more drastic collection efforts.
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How to File Back Taxes
evening if you have n’t filed or paid taxes in years, it ‘s potential to get caught up. here ‘s how .
Step 1: Gather Your Documentation
If you have all your tax documents and fair have n’t filed even, this step will be easy. however, if you lost your tax records or merely have n’t been diligent about keeping your records, this might take a little more influence. fortunately, you have options .
- Find the information online. These days, many banks, brokerages, and mortgage companies make tax documents available online. So if you’re missing information on investment income or a mortgage interest statement, try logging into your online account to access a copy.
- Order a Wage and Income Transcript from the IRS. A Wage and Income Transcript includes all information reported to the IRS on your behalf, such as W-2s and 1099s. You can order a Wage and Income Transcript online via the IRS Get Transcript tool or by mail using Form 4506-T, Request for Transcript of Tax Return.
- Review bank and credit card statements for deductions. Your Wage and Income Transcript won’t include things like charitable deductions or business expenses. Get copies of your bank account and credit card statements for the years in question and look for any deductible expenses.
You may not be able to recreate every tax phonograph record you ‘re missing, but this should be a good depart .
Step 2: Prepare and File Your Tax Returns
Most on-line tax software programs allow you to file previous year returns, and your tax professional can file back tax returns deoxyadenosine monophosphate well. however, you will need to print out and mail the forms, as e-filing prior class returns is normally not an option .
Step 3: Ask for a Penalty Waiver
There are broadly two reasons the IRS might consider waiving your penalties :
- Reasonable cause. The IRS might waive penalties if you didn’t file tax returns because of extenuating circumstances, such as a natural disaster, illness, or death of an immediate family member.
- First-time penalty abatement. The IRS may do you a one-time favor and remove your penalties if you normally file tax returns on time.
Call the IRS at 1-800-829-1040 to request penalty suspension or have your tax professional send a letter explaining the circumstances .
Step 4: Plan to Pay the Tax Due
If you can afford to pay your bet on taxes, send a see with your tax return. differently, the IRS will typically give you more meter to pay. You can apply online for an IRS episode agreement or learn more about the IRS ‘s fresh Start Program .
If you need help filing back taxes, requesting penalty abatement, or navigating your payment options, work with a qualified tax professional. They can help you better understand your options and negotiate with the IRS on your behalf .