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Back Taxes: Filing Late Tax Returns

Essential Information to Help You File Back Taxes

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Updated April 17, 2014
If you haven't filed your taxes in a few years, you may be wondering what options you have. You may be surprised to learn that filing your tax returns can be the quickest way out of tax trouble. But you need to protect yourself. Here's how.

Six Steps to Taking Control of Your Back Taxes

Step One: Gather All Your Tax Documents

When was the last year you filed? Do you have a copy of your tax return? Do you have W-2s and other tax documents for the years you need to file? If you are missing any crucial tax documents, you can request copies of your tax documents from the Internal Revenue Service for free.

Step Two: Prepare the Tax Returns or Hire a Tax Professional

If you are going to prepare your tax returns yourself, be sure to use a reliable and easy-to-use software program. You can find an overview of prior year software. You should plan on spending about 2 to 3 hours per tax return you need to file.

An experienced tax professional, on the other hand, can help you deal with the IRS. The best way to find a tax pro is to ask your friends, and find a professional with significant experience in preparing back taxes. Good reasons to hire a tax pro: if you need advice on how to handle incomplete tax documentation, or an advocate who will negotiate with the IRS on your behalf.

Either way, you'll be doing plenty of work yourself, such as tracking down missing information.

Step Three: Prepare Your Tax Returns

You won't know if you are getting a tax refund or owe the IRS until you or your tax professional have prepared your tax returns.

Step Four: Protect Your Tax Refunds

Believe it or not, late filers are most likely than the general population to have tax refunds. You absoultely need to know that there are strict time limits for refunds, audits, and debt collection. Your plan of action should provide an estimate for how long it will take to get your refund checks. If you owe other tax debts, you need to know how much of your refunds will be applied to other tax years. If you think you might owe next year, you should plan on making estimated tax payments to avoid owing.

Step Five: Pay off Your Tax Debts

You should create a plan for how you will pay off your tax debts, if any. You also need to plan on how to protect yourself from an IRS investigation, assessment, levy, or lien. Fortunately, it is very easy to do this, but it requires patience, good judgment, the ability to talk courteously with the IRS, and the advice of a competent, experienced professional. Your plan of action may be as simple as setting up a monthly payment plan, or writing a check for the full amount. But you need to have a plan, because ignoring the IRS can get you into big trouble real fast.

Step Six: Plan Ahead

How about planning ahead to boost up next year's tax refund? Your plan of action should focus on the future, not just the past. This is a good opportunity to review your overall tax situation, and to come up with strategies for reducing your taxes and achieving your financial goals.

The Tax Laws You Really Need to Know

You really need to know four provisions in the tax code.

(1) IRS assessments can be fixed by filing a tax return. Sometimes the IRS will take an educated guess about what your tax liability might be. The IRS will then send you a notice of proposed assessment, or even file a return on your behalf. You can reduce or eliminate the IRS proposed assessments by filing your back tax returns.

(2) There are strict time limits for getting a refund, for collecting on tax debts, and for auditing your tax returns. You need to know these IRS Statute of Limitations, because they have a direct impact on your tax filing strategy.

(3) The IRS has the authority to impose penalties and interest on tax liabilities not paid in full by the deadline for the tax return. You need to know how IRS penalties and interest are calculated, and what you can do to minimize them.

(4) Your tax information is absolutely, totally, and completely confidential. A tax professional is ethically and legally obligated not to share your tax information with anyone – not even with the IRS – unless he or she has your explicit authorization.

Some Final Tips on Filing Back Taxes

Late tax returns must be filed on paper, and mailed into your local IRS Service Center. You can use tax software to prepare your tax returns, but you cannot electronically file your returns.

Mail your tax returns in separate envelopes, and send them by Certified Mail. You will have a proof that each return was received by the IRS. Mailing them in separate envelopes will help prevent the IRS from making any clerical errors in processing your returns.

Hand deliver your tax returns to your local IRS office if time is of the essence. Make photocopies of page one of each tax return, and take the photocopies with you. Ask the IRS representative to stamp the photocopies as received. These receipts provide evidence of what you filed, when you filed, and where you filed.

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