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Taxation

Introduction

Filing back taxes can be a daunting task, especially if you’ve missed one or more tax seasons. Whether you’re an individual taxpayer or a business owner, addressing past-due tax returns is essential to avoid penalties, interest charges, and potential legal consequences. In this article, we’ll delve into the steps involved in filing back taxes, common challenges, and strategies to navigate the process effectively.

1. Gather Your Documents

Before diving into the filing process, gather all relevant documents for the tax year(s) in question. These may include:

W-2 Forms: These show your income and withholding from employment.
1099 Forms: If you received income from sources other than employment, such as freelance work or investments, you’ll need these forms.
Bank Statements: These help verify income and expenses.
Receipts and Invoices: If you’re claiming deductions or credits, organize supporting documentation.

2. Determine How You’ll File

Choose the most suitable method for filing your back taxes:

Online Filing: Use tax software or online platforms to prepare and submit your returns electronically. This option is convenient and ensures accurate calculations.
Paper Filing: If you prefer a manual approach, complete the appropriate tax forms and mail them to the IRS.

3. Be Prepared to Pay Fees or Penalties

Late filing often results in penalties and interest charges. Here’s what to expect:

Failure-to-File Penalty: The IRS imposes a penalty for not filing on time. It starts at 5% of the unpaid tax due and increases by 5% for each month the return remains unfiled, up to a maximum of 25% of the tax due.
Interest: In addition to the penalty, interest accrues from the original due date of the tax on any unpaid balance. This means that the longer you delay filing, the more interest accumulates.

4. Claim Your Refund

Don’t forget that you risk losing your refund if you don’t file your return. If you’re due a refund for withholding or estimated taxes, you must file your return to claim it within 3 years of the return due date. The same rule applies to tax credits, such as the Earned Income Credit.

5. The IRS May File a Return for You

If you fail to file, the IRS may file a substitute return on your behalf. However, this return might not give you credit for deductions and exemptions you’re entitled to receive. You’ll receive a Notice of Deficiency CP3219N (90-day letter) proposing a tax assessment. You’ll have 90 days to file your past-due tax return or file a petition in Tax Court. If you do neither, the IRS will proceed with the proposed assessment.

6. Get Relief from the IRS

If you owe more than you can pay, consider these options:

Request an Additional 60-120 Days: You can request additional time to pay your account in full through the Online Payment Agreement application or by calling 800-829-1040. No user fee will be charged.
Installment Agreement: If you need more time to pay, set up an installment agreement.
Offer in Compromise: You may qualify for an offer in compromise, which allows you to settle your tax debt for less than the full amount owed.

7. Don’t Forget Your State Return

Remember that state tax returns are equally important. If you owe state taxes, address those as well.

8. Clean Up Your Act

Filing back taxes can be stressful, but taking action promptly is crucial. Organize your paperwork, choose the right filing method, and seek professional assistance if needed. By addressing your past-due returns, you’ll protect yourself from further financial and legal complications.

Remember that seeking professional advice from a tax expert can provide personalized guidance based on your unique situation.

For more information, visit the IRS website.

Conclusion

Filing your back taxes is a responsible step toward financial compliance. Take control of your tax situation, file your returns, and regain peace of mind. Contact our Tax Group for assistance.

Joshua M. Stahley

Chairman, CEO, & Managing Director of Legal Services

The Law Offices of Joshua M. Stahley, P.A

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