How Do I File Returns for Back Taxes?
• A taxpayer can file back taxes for any past year, but the IRS usually considers a taxpayer in good standing if they have filed the last six years of tax returns.
• If a taxpayer was qualified for federal tax credits or refunds in the past but did not file tax returns, they may be able to collect the money by filing back taxes. However, the IRS only allows for a taxpayer to claim refunds and tax credits within three years of the tax return’s original due date.
• If a taxpayer has owed taxes in previous years but did not file tax returns, they can stop some penalties and interest by filing back taxes, even if they are unable to pay the balance that they owed.
• Filing back taxes and paying the associated taxes can help taxpayers qualify for Social Security retirement and disability benefits and Medicare benefits. Having tax returns for past years can also help with loan applications.
Catching up on taxes: Should you file back taxes?
It may not be too late to file a previous year’s tax return to pay what you owe or claim your refund. It is important to be in full compliance with the IRS, to avoid unnecessary penalties.
Filing back tax returns could help you do one or more of the following:
1. Claim a refund
One reason to file a back tax return is to see if the IRS owes you a tax refund. While many people have federal income taxes withheld from their paychecks, sometimes too much money is withheld. In these cases, filing a tax return could result in a tax refund that puts money in your pocket.
2. Stop late filing and payment penalties and interest
Filing a tax return on time is important to avoid or minimize penalties, even if you can’t pay the balance you owe. If you don’t file your return, you may have to pay an additional fee of 5% of the unpaid tax you were required to report for each month your tax return is late, up to five months. Minimum penalty limits can also apply.
The IRS assesses another penalty for a failure to pay your taxes owed. If you do file on time, but you can’t pay what you owe in full by the due date, you’ll be charged an additional 0.5% of the amount of the tax not paid on time for each month or part of a month you are late. These fees will continue to accrue until your balance is paid in full or the penalty reaches 25% of your tax, whichever comes first.
The IRS also charges interest on overdue taxes. Unlike penalties, interest does not stop accruing like the failure to file and failure to pay penalties.
3. Have tax returns for loan applications
Certain types of loans, such as mortgages and business loans, may require you to have documentation of your income as part of the approval process. Filing your tax returns before you apply for a loan helps make the application process easier.
4. Pay Social Security taxes to qualify for benefits
Self-employed individuals have to pay Social Security and Medicare taxes through their individual income tax returns. By filing a return and paying the associated taxes, you report your income so that you may qualify for Social Security retirement and disability benefits and Medicare benefits when you need them.
How late can you file?
The IRS prefers that you file all back tax returns for years you have not yet filed. The IRS prefers that all taxpayers be in full compliance and file on time. That said, the IRS usually only requires you to file the last six years of tax returns to be considered in good standing. Even so, the IRS can go back more than six years in certain circumstances.
Unfortunately, there is a limit on how far back you can file a tax return to claim tax refunds and tax credits. This IRS only allows you to claim refunds and tax credits within three years of the tax return’s original due date. By not filing within three years of the due date, you might end up missing out on a tax refund because you can no longer claim the tax credits or any excess withholding from your paycheck.
How to file tax returns for previous years
Filing a tax return for a previous year isn’t as hard as you may think, but it does require a few steps. CuraDebt Tax, a professional debt settlement firm, is available to help you with all of your tax related issues, including unfiled tax returns.
1. Gather information
The first step we will pursue is to gather all necessary tax information from you. We will collect your W-2s, 1099s, and information for any deductions or credits you may qualify for.
2. Request tax documents from the IRS
Finding documents from previous years may be challenging for some. Thankfully, we are able to contact the IRS on your behalf. You will never have to worry about dealing with the IRS on your own again.
3. Complete and file your tax return
Once we have all the forms that we need, we will use the tax forms from the year we are filing. Patience is important when filling out a tax return by hand. Thankfully we have a team of tax professionals who are here to do the tedious work for you.