How Many Years of Unfiled Tax Returns Will the IRS Go Back?

How Many Years of Unfiled Tax Returns Will the IRS Go Back?

Not filing your taxes can seem scary. Maybe you’ve missed a year, or two, or more. You may worry about getting in trouble with the IRS. But the good news is, even if you haven’t filed taxes in awhile, there are still options. The IRS wants people to file, even if late. They make it pretty easy to get caught up. This article will explain everything you need to know about filing late returns, how many years back the IRS can go, and what your options are.

Do I Need To File Taxes Every Year?

First, you need to know if you even had to file taxes in prior years. The IRS has rules about who has to file based on your income, age, and filing status. You can check the instructions for Form 1040 from each year to see the thresholds. For example, in 2022 a single person under 65 had to file if they made $12,550 or more. If you were below the threshold those years, you may not have needed to file. But if you made above it, you were required to.

Why Should I File Past Returns?

Even if you didn’t need to file, there are good reasons to do it anyway if you were owed a refund. You usually have 3 years to claim refunds by filing a return. Otherwise that money goes away. Filing can also help with things like getting student aid or home loans that require tax docs. Plus it builds your work record for Social Security down the road. So don’t leave that money on the table- file to get it back!

How Far Back Can The IRS Go?

If you owed tax and didn’t file, there is no time limit on when the IRS can come after you. Seriously, they can audit and bill you 30 years later if they want. Not filing gives the IRS unlimited time to collect. But if you file, even late, the clock starts ticking on how far back they can go. Once you file, the IRS generally has just 3 years to audit and assess additional tax. So while there’s no time limit if you don’t file, filing starts the clock and limits their power.

When Do I Lose My Refund If I Don’t File?

If you were due a refund, you have 3 years to claim it by filing your return. So say your 2018 return was due April 15, 2019. You’d have until April 15, 2022 to file and get that refund. After that 3 year window closes, the money is gone for good. The IRS calls this the “refund statute of limitations.” Don’t lose out by waiting too long!

Can I Still File Returns After 3 Years?

Yes, you can and should still file a return even if it’s more than 3 years late. While you lose the ability to get a refund, there are still good reasons to file. It will report your income history to the IRS and Social Security. It starts the clock on audit exposure. And it fulfills your obligation to file required returns. There’s no penalty for filing late (just interest if you owe), so go ahead and submit even old returns.

What If I Never Filed Taxes, Like Ever?

If you’ve never once filed a return, the IRS may not even realize you exist! You absolutely need to get caught up. File the last 6 years at a minimum. This will get your account set up with the IRS and get you in compliance. Make sure to check if you need to file for years before that too based on the income thresholds. It’s never too late to start filing.

What Penalties or Interest Do I Owe?

If you owed tax and didn’t file, you’ll owe interest on the amount due. The IRS charges interest on unpaid tax from the original due date of the return. The rate varies quarterly but can be 3% – 5% per year. The interest really adds up over time. You’ll also owe a “failure to file” penalty of 5% per month up to 25% of the tax due. If you had a refund due, you don’t owe any penalties- just make sure to claim it within 3 years.

How Do I File Old Returns?

To file previous year returns, you’ll need to get the correct Form 1040 and instructions booklet for each year. The IRS website has prior year forms and publications. You’ll also need to track down old W-2s and 1099s. Check with your employer(s) and banks to request copies if you don’t have them. Make sure to attach W-2s to the returns. Mail paper returns to the IRS service center for your state. You can also e-file returns electronically through tax software or a tax preparer.

Can The IRS File Returns For Me?

In some cases the IRS can file a return for you, called a “substitute return.” They do this when they have all the info needed from 1099s and W-2s to calculate the tax. A substitute return allows the IRS to assess tax, penalties, and interest. But it does not give you any deductions or credits you may deserve. It’s much better to file yourself instead of letting the IRS do it.

What If I Can’t Pay The Tax I Owe?

If you have a balance due on past returns, options are available. You can set up an IRS payment plan to pay over 6 years. An offer in compromise can settle tax debt for less than the full amount in some cases. You may qualify for “currently not collectible” status to suspend collection until your finances improve. Penalty abatement can remove penalties for reasonable cause. Don’t let owing money stop you from filing.

Can I Get In Trouble For Not Filing?

It is illegal to not file returns you are required to. But the IRS mainly uses civil penalties like failure-to-file penalties, not criminal charges. Jail time is very rare and usually only pursued in tax fraud cases. However, the IRS can be aggressive using liens, levies, and seizures to collect large unpaid balances. Not filing also eliminates the protection from audit after 3 years. So it’s best to come clean now and get compliant.

Should I Hire a Tax Pro To Help File Late Returns?

Preparing multiple past due returns with proper documentation can be complex. Tax pros have experience filing old returns and guiding clients through the process. They also understand relief options if you owe money. Their expertise comes at a cost, but may be money well spent to get this resolved. The IRS offers free help too, but expect long wait times to talk to an agent.

Take Control Of Your Tax Situation

It’s never too late to start filing your tax returns with the IRS. Even if you haven’t filed in years, the IRS wants you to get compliant. You may still be able to claim refunds and build your income history. Filing also limits how far back the IRS can audit. Consider hiring a tax pro for help if you have many past due returns. Don’t wait- start gathering old forms and file those returns. Take control of your tax situation today!

Sources:

IRS Filing Past Due Tax Returns

IRS Don’t Lose Your Refund by Not Filing

IRS Audits

IRS Topic No. 153, What to Do if You Haven’t Filed Your Tax Return