So, with just a few days left before the April 15 deadline, you might be wondering: What if I keep on ignoring my taxes? How long can this con go on? Unfortunately, that's a mighty risky gamble. You're better off filing as soon as you can, or else be on the line for costly penalties and interest. Here are the steps you need to address unfiled tax returns and get back on track with the IRS.
The IRS imposes a late filing penalty of 5% of the unpaid taxes for each month the return is late, capped at 25% of the unpaid tax bill. Additionally, interest accrues on both unpaid taxes and penalties from the due date until the debt is settled.
Steps to take to file your old taxes ASAP
The good news: The IRS generally prefers late filing to no filing at all and has programs to help taxpayers become compliant.
If you're missing documents—understandable, at this point—you can request wage transcripts from the IRS through a few different avenues:
Form 4506-T (Request for "Transcript of Tax Return")
Determine which years you need to file
The IRS generally focuses on the last six years of unfiled returns, though legally you should file for all unfiled years. Priority should be given to the most recent three years, so that you have a chance of getting your potential refunds. After that, focus on any years during which you had significant income.
Use commercial tax preparation software. Think big names like H&R Block, TurboTax, and FreeTaxUSA.
File by mail. Mail each year separately with appropriate documentation.
Address your payment options
Installment agreement: A monthly payment plan until you're paid up
Currently Not Collectible status: Temporary hardship relief
Administrative penalty relief: They may waive failure-to-file penalties for first-time offenders with a good compliance history.
Streamlined filing compliance procedures: For taxpayers with foreign accounts who haven't filed required FBAR forms.
Going forward
If you find yourself with multiple years of unfiled returns, or maybe even need representation before the IRS, you really should consult with a qualified tax professional.
Remember: Your current situation is fixable, and addressing it sooner rather than later will always be the smartest choice.
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