How Many Years Can You File Back Taxes?

At BC Tax, we have been able to help negotiate successful installment agreements for taxpayers across the nation. If you believe your tax liability was calculated incorrectly or you need help with paying your owed taxes, we can help you find a tax solution that is right for you. If you need help filing back taxes, requesting penalty abatement, or navigating your payment options, work what are the three types of accounts with a qualified tax professional. They can help you better understand your options and negotiate with the IRS on your behalf. There is no time limit for submitting a previously unfiled return, but if you still want to claim a refund, you have up to 3 years from the return’s due date. Therefore, gathering and locating all the relevant financial records for each return is essential.

This means that if you are eligible for a tax credit, the amount of the credit may be reduced. Learn more about the different fees the IRS charges and options for paying them. Filing your return is the first step to getting back into compliance with the IRS and most states. There are many negative consequences that come along with having unfiled tax returns. Filing a tax return is usually a smart move even if you can’t afford to pay off the balance in full. Filing reduces or prevents penalties, and once you file, the IRS and most states are willing to work with you.

Help Filing Your Past Due Return

Under the Internal Revenue Code § 7201, an attempt to evade taxes can be punished by up to 5 years in prison and up to $250,000 in fines. The IRS usually doesn’t find it worth going back more than six years to collect back bills, even though it has the authority. So just because skipping a year didn’t immediately attract the IRS doesn’t mean you’re off the hook. The IRS even has the power to file a tax return on your behalf, but it won’t include all the deductions and tax credits you or your business are entitled to.

In some circumstances, an IRS statute of limitations will work to your advantage. That is why I encourage you to reach out to me if you want to learn how it could apply to your situation. But, keep in mind that since the IRS has 10 years to collect a liability from the assessment date, it might be beneficial to you to retain your records for this time period. For taxpayers who file an Offer in Compromise (OIC)[2], the CSED will be extended for its duration plus an additional 30 days. It is extended on non-dischargeable tax liabilities, from the date of filing for bankruptcy to the date the bankruptcy is either discharged or dismissed.

What happens if you don’t file your back taxes?

Having old, unfiled tax returns may lead you to believe that the state tax agency or the IRS has forgotten about you and you are off the hook. However, the truth is that you can still be on the hook for taxes you owe 10 years down the road. Even though the IRS can request your tax filings for the past six years, they can’t collect taxes owed after ten years due to a statute of limitations. However, note that they may aggressively attempt to pursue payment as this 10-year deadline draws nearer. Remember that the statute of limitations outlined above pertain only to federal income tax returns. The statute of limitations in any state where you have a filing requirement may differ.

Your request should most likely be automatically approved if you owe less than $10,000. You can also file IRS Form 9465, the Installment Agreement Request, with your tax return, regardless of how much you owe. It can take up to 21 days to receive your refund when you file a previous year tax return for the first time electronically.

Offer in Compromise & the IRS audit statute of limitations

Compliance is a first step in reaching any agreement with the IRS. The IRS may file a Substitution for Return (SFR) on your behalf, which you are liable for. When an SFR is filed, it may leave off some deductions or exemptions that belong to you, resulting in a higher tax bill.

The late payment penalty is 0.5% of the tax amount unpaid, up to a maximum of 25%. Based on their substitute filing, the IRS can bill you for back taxes, plus failure-to-file penalty fees. The penalties and interest stack up if you are late in paying the amount they have assessed as due. If you owe back taxes, consult a qualified tax preparer such as a CPA as well as legal counsel. These professionals can help you find any deductions and credits that will reduce your overall tax bill. They can also negotiate with the IRS and FTB to set up a payment schedule you can reasonably meet.

Statute of Limitations on Tax Collections From Returns Filed After SFR

If you’re behind on your taxes, it’s never too late to work with the IRS to clear your record. The IRS will accept up to six years of returns, so there’s no need to panic if you find yourself in this situation. The IRS also has several options to help you catch up on your back taxes if you cannot afford them. In any case, it’s always best to address your back tax situation as soon as possible, so you can focus on looking ahead and growing your business.

• Examples include filing a lawsuit after a traffic accident or for medical malpractice.
• Outside of this three-year limit, the IRS cannot issue a refund to you, apply the refund to your outstanding balancing or apply the refund to a future estimated payment.
• You may not owe the IRS anything, but you should still file your back taxes to make sure.
• Fortunately, if you are behind on taxes, you can get back in good standing.
• By law, you have a three-year window from the original due date of your return to claim a tax refund.

They will notify you first of their intent to do so, and give you an opportunity to respond. If you do not file your tax return on your own by their deadline, then they will complete the return for you. Back taxes are simply the amount of money you owe the IRS that you didn’t pay by the filing due date. Perhaps it was caused by an oversight, not making enough in estimated tax payments, or financial hardship. Regardless of the cause, missing your filing due date will result in the IRS tacking on interest and penalties, increasing your tax liability.

Not only will this help to minimize late fees and penalties, but it will also put you in a better position to negotiate a payment plan or offer in compromise. The IRS’s return also omits cost-saving tax credits your small business may be eligible for. Fortunately, if the IRS filed an SFR on your behalf, you don’t have to accept its assessment.