In tax matters, there are few things as troubling as falling behind on IRS returns. It is one of the worst situations of its kind, especially if the backlog is several years old.
When the backlog is several years old, it is normal to feel overwhelmed at the thought of catching up again. However, although it can be tedious and time-consuming, with the right information, it is possible to do it without major inconveniences.
How to file back taxes?
The following steps are especially useful when the amount of tax arrears is considerably high, i.e., more than one or two years. When the arrears are significantly less, they are equally valid, but there will be certain unnecessary aspects.
Contact the IRS as soon as possible.
If you are in this article because you received a call from the IRS, you are not in the best situation. From this point on, the IRS can start taking various steps to collect their taxes, regardless of whether you are in a position to pay them.
Therefore, when you have received one of these calls, it is best to contact the IRS immediately to find out your tax situation and the best way to address your case.
Even if you are in a situation where you do not have the time or money to respond to the IRS, you should contact them and let them know. You will probably be assigned a representative with whom you can reach various agreements.
Under no circumstances should you ignore the problem hoping for a magic solution or the disappearance of the taxes because, rest assured, it will not happen. The taxes will continue to accumulate fine after fine and interest after interest.
Between penalties and interest accrued on unfiled returns, you could pay 50% more than you originally owed. You can lose even your deductions and refunds depending on the conditions.
Research all of your debt
You can do this step during the call from the IRS or after the call, but it is indispensable to get you started catching up on your taxes.
The best way to do this is to call the IRS directly at (800) 908-9946 and request as many transcripts as you deem necessary. In these cases, you can request a transcript of your account.
In the account transcript, you can view all the respective information about your financial status with the IRS and fines and penalties. You can also request a transcript of wages and income to ensure a concise statement.
If, instead of transcripts, you want to get an idea of how much your total debt is, you can call 800-829-1040 directly and request the information from the representative who answers your call.
Another efficient way is to log into the IRS online system with your virtual account (you must have created it previously) and see the specific debt for each tax year and the total balance.
Get the documents
Probably, to file your back returns, you will need a series of documents along with the forms concerning each year. Try to gather them as organized as possible.
Fill out each form one by one and get the documents for the form, if needed. You can obtain most of the necessary documents directly from the IRS; you can call them and ask for them.
File your returns
Once you have completed all the above steps, filing your returns and any outstanding payments is time. You can call the IRS at one of the numbers listed above and ask about the best way to do this.
Usually, the most favorable is to make an online payment through your IRS account. To do so, you must have the amount due or the amount to be paid available in your bank account.
Using the postal service, you can also pay with a check or money order. Another equally valid option is to pay cash with one of the associated stores or retailers.
We have several recommendations for you and your debt
Beyond the steps to follow to file taxes the traditional way, we have several recommendations that can help you make the process easier and even reduce the total amount owed.
Request the elimination of fines and penalties
As mentioned throughout this article, the fines, interest, and penalties for late IRS filings are considerable. But, it doesn’t have to stay that way.
When you have valid enough reasons for not having filed tax returns for several years, you can send a very formal letter to the IRS explaining the reasons that led you to such a situation.
Along with the reasons why you did not cancel your taxes, you must commit to canceling them properly from now on.
Your request will not necessarily be approved, depending on whether your reasons are compelling enough to justify your failure to file a return and several other factors. But, if accepted, you may end up paying only the original debt.
Hire a professional
As in all legal branches, there are also professionals in charge of carrying out the whole procedure regarding back taxes. It is one of the best ways in both ease and speed.
When hiring a tax professional, you should grant him partial or complete authority to help you file all your returns or to carry out the procedure himself with little or no hassle.
Pay as much as you can afford
When you have several years of accumulated taxes, the debt is considerably large, and not everyone may have the money available to pay off the entire debt.
Under that situation, the ideal is to pay at least a part. It should be as large as possible to continue avoiding the accumulation of penalties and other interests.
If you do not have the money in full, you should discuss it with your agent, explain the amount you can currently pay, and agree on a convenient payment plan.