Back taxes are taxes left unfiled or unpaid from previous years. This could be due to financial hardship, missed deadlines, and a lack of information about filing obligations. If you have back taxes to resolve, take action immediately, as unpaid taxes continue to accumulate penalties and interest over time. You also put yourself at risk of avoidable consequences like wage garnishments, tax liens, and loss of potential tax refunds.
The first step to filing back taxes is gathering the required financial records. Next, proceed to fill out the right tax forms for each missed year and submit the forms to the IRS. When you do this, you can then have access to any unclaimed refunds and improve your financial standing for loans.
Victory Tax Lawyers can help if you’re struggling with unfiled tax returns. Our experienced tax attorneys at Victory Tax Lawyers work directly with the IRS to reduce penalties, negotiate manageable payment plans, and resolve outstanding tax issues. Schedule a free consultation today to take the first step toward tax relief.
In this post, we’ll walk you through everything you need to know about filing past-due tax returns. We’ll also discuss how many years you can file back taxes, what happens if you don’t file, and how to reduce penalties.
How Many Years Can You File Back Taxes?
There are a number of years that you must file taxes to be considered compliant. The IRS generally requires taxpayers to file their last six years of tax returns. However, this rule isn’t set in stone. The IRS can adjust its approach based on individual circumstances.
If you are owed a refund (probably due to estimated tax payments or withholding), the IRS gives you three years starting from the original due date to file a tax return to claim it. The deadline to claim tax credits like Earned Income Tax Credit (EITC) is the same three-year period during which you must file for tax refunds. Missing the deadline means you forfeit any refund.
Even if more than six years have passed, you should still file your back taxes to prevent the IRS from taking actions like tax liens and wage garnishments against you.
How to File Back Taxes
Breaking the back tax filing process into clear steps can make it more manageable. Whether you need to catch up on a single missed year or multiple returns, here’s a step-by-step guide to filing back taxes effectively:
1. Gather Necessary Documents
As your first action, begin by collecting financial documents related to all the different tax years from your records. The financial documents essentially include W-2s and 1099s, self-employment income statements, and investment records, not forgetting your IRS wage, income transcripts, and documentation of your estimated tax payments. You should also gather all documents that support your eligibility for deductible expenses, such as mortgage interest, student loan payments, and business costs. Having an accurate tax return file sees to it that all income, deductions, and credits are reported correctly. If you’ve misplaced some records:
- Contact Employers or Financial Institutions: Reach out to previous employers or financial institutions to request copies of W-2s, 1099s, or other pertinent documents.
- Request IRS Transcripts: The IRS can provide wage and income transcripts, which summarize information reported to them by third parties. These transcripts are available for up to ten years and can be obtained by submitting Form 4506-T or accessing your IRS online account.
- Review Bank and Credit Card Statements: These can help reconstruct income and deductible expenses. While not a replacement for official tax documents, they can serve as supporting evidence.
2. Determine Which Tax Years Need to Be Filed
To stay compliant with the IRS rules, you must file past-due returns for the past six years, though older returns may be needed in certain situations. Make sure to identify missing tax return files that need to be submitted and verify which tax years need to be submitted by examining IRS notices and reviewing your tax transcripts for unfiled years. You should also submit a correct original return to the IRS after they file a substitute return to reduce your tax obligations. Note that Form 1040 for individual returns and Form 1099 for self-employment and other types of income are necessary tax forms for each year.
3. Download and Complete the Correct Tax Forms
Each past-due tax return must be filed using the appropriate forms for that tax year. You can find all tax forms for each year exclusively on the IRS website. Individuals are required to use Form 1040, while the self-employed should add Schedule C to their tax returns. Since prior-year tax returns cannot be filed electronically, they must be printed and mailed. The IRS will slow down processing time and potentially investigate further if you submit incomplete forms accurately.
4. Calculate Taxes, Deductions, and Credits
After finishing the tax form processing, evaluate the total taxable income and apply approved deductions and credits. Accurate tax liability assessment becomes possible through this process. This, in turn, lowers the chances of overpayment or penalties. Your taxes must be carefully and accurately assessed since wrong computations will result in unwanted financial challenges.
5. Submit Your Tax Returns
Only current tax returns can be submitted electronically. If you need to file back taxes, you must send them to the IRS by mail. You need to add signature authenticity to every required form along with essential documents before their submission. It is advisable to keep backup copies of your filed returns for personal records.
When filing a tax return for a year when stimulus payments were issued, you must properly report the received amount. Claiming the Recovery Rebate Credit will reduce your tax debt and increase your refund size if you received less than your entitled stimulus payment.
The Recovery Rebate Credit represents the third Economic Impact Payment that the government distributed to taxpayers in 2021. However, you cannot receive nor claim the Recovery Rebate Credit or Economic Impact Payment now because the government did not distribute any stimulus payments during 2022, 2023, or 2024.
6. Consider Payment Options
If you’re unable to pay your full tax amount, the IRS offers options to ease the burden:
Installment Agreement
This allows you to pay your tax debt over time through manageable monthly payments. To request an installment agreement, you can apply online using the IRS Online Payment Agreement tool or submit Form 9465, Installment Agreement Request, by phone or mail. Setup fees for installment agreements vary based on your income level, the amount owed, and how you apply. Applying online may incur a setup fee of $31.
Offer in Compromise (OIC)
An OIC allows you to settle your tax debt for less than the full amount owed, providing relief if paying in full would cause significant financial hardship. To qualify, you must be current with all tax filings, not be in bankruptcy, and have received a bill for at least one tax debt included in your offer. Also, you must make all required estimated tax payments for the current year. The application involves completing Form 656, submitting financial statements, and paying a non-refundable application fee, typically starting at $205, along with an initial payment toward your tax liability. Given the complexity and strict eligibility criteria, it’s advisable to consult with a tax professional to navigate the process effectively.
7. Seek Professional Help
For complex tax situations, consulting with a tax attorney or accountant can be beneficial. Professionals can provide expert guidance on available deductions, credits, and relief options while ensuring compliance with IRS regulations. Their assistance can help minimize financial liability and streamline the filing process. They can also assist in reconstructing past tax returns if your records are incomplete.
Consequences of Not Filing Back Taxes
Failing to file back taxes can lead to serious financial and legal consequences. Here are the possible consequences you may face if you fail to file your taxes on time:
1. Substitute Returns
Filing tax returns may trigger the IRS to create a Substitute for Return (SFR) in your place. The IRS may prepare a Substitute for Return (SFR) on your behalf if you fail to file, but these forms do not account for any exemptions, credits, or deductions you may be eligible for. As a result, the tax liability calculated by the IRS is often higher than what you would owe if you filed your own return with accurate information.
2. Penalties and Interest
Taxpayers who do not file their taxes must pay substantial financial penalties to the IRS. According to IRS rules, you must pay a maximum penalty of 25% for each month when the taxes remain unpaid. If 60 days pass after the deadline, you will be required to pay a minimum of $100 to $485, or even 100% of the unpaid tax amount, depending on when your return was due.
3. Collection Actions
The IRS uses aggressive collection methods like issuing a federal tax lien when taxpayers fail to pay back taxes. A federal tax lien issued against your property can lead to severe damage to your credit score. In more serious cases, the IRS can seize bank funds, deduct taxes from wages, or confiscate possessions to pay taxes.
How Much Does It Cost to File Back Taxes?
Your back tax filing expenses depend on your tax situation, in addition to the filing method you choose. Several expenses determine the cost of back tax filings based on your unique tax circumstances and filing method. These expenses include:
1. Penalties and Interest
If you don’t meet your tax obligations, the IRS imposes failure-to-file and failure-to-pay penalties. The failure-to-file penalty can range from 5% per month to a maximum of 25% of the unpaid tax amount. Meanwhile, the failure-to-pay penalty begins at 0.5% per month and continues to accumulate. Interest will accrue on any outstanding balance until it is fully paid. However, first-time penalty abatement may be available to eligible taxpayers, allowing them to waive certain penalties.
2. Filing Costs
Users with simple tax profiles can file back taxes through either IRS Free File or basic applications such as TurboTax or H&R Block without incurring any fees. Paid versions or professionals become necessary if you have complicated tax cases like those involving self-employment, multiple income streams, or deductions.
3. Hiring a Tax Professional
Working with a tax preparer, accountant, or tax attorney can help you ensure your back taxes are handled properly. Their fees depend on how complex your case is and how many years need to be addressed. For basic tax preparation, you may pay anywhere around $150–$500 per return, while for complex filings with multiple years or IRS negotiations, you may pay around $1,000 plus.
4. Mailing Expenses
If you’re filing paper tax returns, postage and certified mail fees are necessary to ensure the IRS receives your documents. Using certified mail with tracking helps you avoid disputes over lost paperwork and confirms timely submission. You can prevent payment of additional penalties and unnecessary expenses in back tax filing processes by taking swift action and making use of low-cost or free resources.
How Long Can the IRS Pursue Collection of Back Taxes?
The IRS operates with strict timelines when assessing and collecting unpaid taxes. Understanding these statutes of limitations is important for managing back taxes effectively:
The Statute of Limitations on Tax Assessment
The IRS generally has three years from the date you file your return (or its due date, if later) to assess additional taxes. However, this timeframe can extend to six years if you underreport your income by 25% or fail to disclose certain financial details, such as foreign accounts.
If you provide fraudulent tax information to the IRS or do not file your returns at all, their ability to audit you remains indefinitely open.
The Statute of Limitations on Tax Collection
Following the IRS assessment of unpaid taxes, the organization has a maximum of 10 years to pursue payment collection. The taxation assessment period starts from the day the IRS reviews the tax information. A tax debt would normally be forgiven when the IRS fails to collect it during the specified timeframe. However, certain actions can pause or extend this period, including filing for bankruptcy, entering a payment plan, submitting an OIC, etc.
Why These Timelines Matter
Knowing these deadlines helps taxpayers:
- Plan repayment strategies to avoid aggressive collection actions.
- Understand their rights if the IRS attempts to collect an expired debt.
- Avoid unnecessary penalties by ensuring tax compliance before extended assessment periods apply.
How to Check the Status of Your Back Tax Return
Is your back tax return processing at an uncomfortable pace? The IRS processes paper-filed returns at a standard rate of six weeks although delays might happen when returns have errors or missing information. You can easily check your return status through these steps:
1. Gather Your Information
Before checking your return’s status, have the following details ready:
- Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN)
- Filing status (Single, Married Filing Jointly, etc.)
- The tax year of the return you’re checking
- Any IRS correspondence related to your return
2. Contact the IRS Directly
Alternatively, you can call the IRS at 800-829-1040 to speak with a representative about your return’s status. However, be aware that contact numbers may vary depending on your location. It is advisable to check the official IRS website for the correct number specific to your region.
3. Check Online Options
The IRS does not currently offer an online tracking tool for back tax returns. However, you can check your account status on the IRS website.
Need Help With Filing Back Taxes?
Owing back taxes can lead to serious consequences, but there are solutions available. Whether you’re dealing with IRS collection actions or need assistance setting up a payment plan, having the right tax professionals on your side ensures you take the best steps toward resolving your tax debt.
Victory Tax Lawyers is ready to assist you in resolving your tax challenges. We know all the ins and outs of resolving complex tax matters, from filing past returns to negotiating settlements and payment plans. Our experienced tax attorneys can advocate on your behalf and develop a strategy to minimize your financial burden.
Take control of your tax situation before the IRS takes action. Contact Victory Tax Lawyers today for a free consultation and start your path toward financial relief.
FAQs
How Can You File Back Taxes Without Records?
It is possible to file back taxes even if you lack tax records. You only need to obtain the necessary financial details from alternative sources. Request your wage and income transcripts from the IRS, the data from W-2s, 1099s, and other employer and financial institutions have been reported. You can make this request from the IRS via the IRS Get Transcript tool, by mail, or by calling directly.
How Many Years Can the IRS Go Back if You Don’t File Your Taxes?
The Internal Revenue Service requires taxpayers to submit their tax returns from their most recent six years to qualify as compliant. However, the IRS has no time limit when it comes to detecting tax fraud or unreported income, it can conduct audit assessments without bounds.
Can You File Taxes After the Due Date?
Yes, you can file taxes following the deadline, but you might face late penalties, together with interest charges because of tax obligations. If you’re due a refund, you can claim it during a three-year time period after the original due date.
How Do You File Income Tax After the Due Date?
Start by identifying the required years for submission, fill out the proper tax documents, and then submit to the IRS. To prevent collection actions while having overdue taxes, you can apply for a payment plan arrangement.
How Can You Pay Back Taxes to the IRS Without Penalties?
The IRS offers several options to help taxpayers resolve back taxes without excessive penalties. If you qualify, penalty abatement can remove or reduce certain penalties. Setting up an installment agreement allows you to pay over time, avoiding further penalties for non-payment. If you can pay in full, doing so as soon as possible will minimize additional charges. In some cases, a professionally negotiated Offer in Compromise can settle your tax debt for less than the full amount owed.
What Is the Penalty for Not Paying Back Taxes?
Failing to file your taxes will result in IRS penalties, starting at 5% of the unpaid taxes per month, up to a maximum of 25% of the total amount owed. A penalty of 0.5% per month begins accruing alongside interest that continues to accumulate throughout the entire time a balance remains unpaid.
