Tax FAQs: How Many Years Can You File Back Taxes?

April 15, 2020

Surprisingly often, people do not file their tax returns because they know they cannot afford to pay their tax liability. This mostly applies to independent contractors and people who sell investments for significant short-term capital gains. However, those with long-term capital gains and W-2 jobs also get behind. Today, we answer how many years can you file back taxes and other frequently asked questions.

Tax FAQs Answered

How Many Years Can You File Back Taxes?

One of the most common questions out there is how many years can you file back taxes. There are several reasons why someone may fail to file their income taxes for one or more years. Luckily, in most cases, the answer to this question is simple. To get back into the good graces of the IRS, you need to file up to six years of income taxes.

How Do I Know if There Is an Exception to the Six-Year Rule?

According to IRS Policy Statement 5-133, Delinquent Returns – Enforcement of Filing Requirements, the enforcement period may be longer or shorter depending on the taxpayer’s prior history of noncompliance, the existence of income from illegal sources, and the effect upon voluntary compliance.

The IRS also considers “the anticipated revenue in relation to the time and effort required to determine the tax due and any special circumstances existing in the case of a particular taxpayer, class of taxpayer, or industry, or which may be peculiar to the class of tax involved.”

So, What’s the Bottom Line?

The bottom line is that the only way to read the IRS’s mind is to hire a tax consultant with extensive experience working with the IRS. Geaux Tax Resolution is owned by a former IRS employee, and our team members have over 35 years of experience successfully working with the IRS. We will call on your behalf to determine exactly what you need to do to get back in good standing.

What’s the Worst That Could Happen?

There are several things that could happen if you do not get back into good standing with the IRS. Primarily, in the event of a national emergency, any stimulus check you are eligible for will be applied to the most recent year you owe back taxes for.

Whether you were a W-2 employee, 1099 independent contractor, or lived off of investments you sold, someone reported your income to the IRS. It knows you did not file your taxes for a given year and you are incurring late fees and penalties with every passing day. Over time, these penalties, fees, and the interest on those penalties and fees will equal 47.5% of your back taxes.

What if I Paid My Taxes But Didn’t File?

If you or your employer made enough quarterly estimated tax payments that you do not owe the IRS any money at the end of the calendar year, you do not necessarily need to file a tax return. In fact, there is a chance that the IRS filed a tax return on your behalf for your records. But the only way to know for sure is to have a tax consultant contact them.

More importantly, you can never assume that just because you paid income taxes throughout the year that you will not owe the IRS more money. There are over 10 million W-2 employees who have filled out their W-4 in a manner such that their employer makes income tax payments on their behalf and yet they still owe the IRS thousands of dollars per year.

When Does the IRS File a Tax Return on Someone’s Behalf?

The IRS files an SFR (substitute for return) roughly three years beyond the due date of the tax return. If the IRS has filed a return for you, request wage and income transcripts for the tax years in question. The IRS can take up to four extra months scrutinizing what you reported compared to the information they had on file for you.

It is equally important to report any quarterly estimated income tax payments you made during the tax years in question. Any discrepancy, whether it favors you or the IRS, is a red flag. You are already under additional scrutiny. You are more likely to be subject to an audit if there are any variances between your SFR and your late-filed tax return.

Should I File My Taxes if I Am Owed a Refund?

Absolutely! The IRS cannot pay you the refund you are owed if you do not provide them with your bank account information or mailing address for a check. Moreover, they do not know everything that happened in your life during the tax year in question that may result in you being owed a refund.

They only know the taxable income you received (unless you earned less than $600 as an independent contractor for a client) and how much you have paid towards your income taxes.

What Is the First Step in Filing Back Taxes?

The first step in filing your back taxes is to file your tax return for the current tax year. While this sounds impossible because the 1040 requests that you indicate how much you paid in taxes during the previous year, all you have to do is find that information from your W-2. A tax consultant can help you ease your anxiety about the complexity of filing back taxes.

What Does a Tax Consultant Need to File My Back Taxes?

Once you have filed your tax returns for the current tax year, it is time to start digging through your old tax records. We need the W-2s or 1099s you received in the years you need to file taxes for and any other taxable income statements you received.

If you are itemizing your deductions or applying for credits in any of the tax years we are filing for, we need receipts and other supporting documents. People who file back taxes are more likely to be audited by the IRS.

What if I Am Missing Documentation?

If you are missing any documentation from the past 10 years, we will file Form 4506-T, Request for Transcript of Tax Return on your behalf. This can take the IRS up to 45 days to complete. However, it will provide you with any W-2s, 1099s or 1098s you need.

What Happens Next?

Next, we download the tax forms from the years we are filing on your behalf and send them in. If you can’t afford to pay your back taxes, late filing penalties and fees and late payment fees and interest, we will help you with that, too.

Schedule Your Complimentary Consultation Today

The fees and penalties associated with failing to file back taxes are staggering. In many cases, they are crippling. But there is hope. If you are ready to stop living in fear, have no fear. Take the first step in getting your life back on track. Contact Geaux Tax Resolution in Lafayette, LA today to schedule your free initial consultation.

We will answer how many years can you file back taxes and any other tax-related questions you may have. Once your delinquent filing is behind you, we can help you plan for the future to minimize tax liability or increase tax refunds in the ever-changing tax landscape of the future.