Tuesday, January 6, 2015

Haven't filed tax returns in 4 years; A discussion....

Over at Reddit we came across the following discussion: Taxes Haven't filed tax returns in 4 years... (self.personalfinance)
submitted by Taxhelplz

For the past 5 years I have been working and earning money but not at all concerned with my personal finance. Over the course of 2014 I managed to turn things around - started a savings, sticking to a budget, making sure all bills and loans are paid on time (thanks /r/personalfinance). 

Now there is one more thing that needs to be addressed. 2009 was the last time that I filed a tax return. In 2010 I missed the April 15th deadline and it snowballed from there... 2011 I didn't know what to do since I never did 2010 taxes, 2012 I didn't know what to do since I never did 2011 or 2010 taxes, etc. 

During this time I was making approximately $28,000 - $30,000 per year with no investments or any other dependents or deductions on my taxes. To the best of my knowledge I do not owe the IRS any money (if anything I should have been getting a return during these years) .
I have been looking around and found a few sites that will assist in filing past due taxes (freetaxusa.com) but I'm not sure if there is anything that I need to be cautious of. Is there a way that I can file 5 years of tax returns online or would I be better off walking into H&R Block, handing them a stack of papers and letting them deal with the mess I made of thing?
all 12 comments
[–]taxmankeithFAQ/Wiki Contributor 49 points  
IRS employee here:
I recommend you visit your local Taxpayer Assistance Center (TAC) and obtain transcripts of your wage and income documents for the years you have not filed, and an account transcript for the last year you did file.
I assume you haven't received any notices asking you to file any of the five federal returns from 2010 - 2013.
If you are due a refund on all four returns, there will be no penalties assessed for filing late. You will, however, have passed the statutory timeframes for claiming a refund on 2010, as /u/swalsh411 indicated.

I recommend you prioritize the 2011 return, as this refund statutory deadline elapses on 4/15/2015. Then prepare and file 2012 and 2013, and then back to 2010.
Please be sure each return is complete and correct, and each return has your current address.
Attach your Forms W-2 (or the transcripts) to the returns.
Don't include any direct deposit information on the past-due returns.
Sign and date the returns.
All returns will need to be mailed, and I strongly recommend you mail them separately, or revisit your local TAC and bring them in.
After the Service receives the 2011 - 2013 returns, you should expect to receive the refund checks after about 8 to 10 weeks.

After you file the 2010 return, you should expect to receive a letter denying the refund claims after about 12 - 16 weeks. These letters will contain your appeals rights for the refunds. If you can establish you were financially disabled during this year, you may be able to pursue the appeal and claim the refund.

If the timeframes above elapse, and you don't receive the refunds or the correspondence, I recommend you contact IRS customer service at 1-800-829-1040 M - F 7am - 7pm and speak with a representative. They will ask some verification questions and research the status of your claims.

If you identify a balance due on any return, prioritize and file it as soon as possible. Then file the refund returns for any of the 2011 - 2013 tax years, and the overpayments will be applied to the balance due. There will be significant assessments of interest, the Failure To File (FTF) penalty, and the Failure To Pay (FTP) penalty on any tax year with a balance due.
Thank you for reading.
[–]x888x 15 points  
I read your username as /u/taxmantaketh.
[–]taxmankeithFAQ/Wiki Contributor 13 points  
These things happen.
[–]lilzero 2 points  
Hi Keith: As a followup, given my tax comments here: http://www.reddit.com/r/personalfinance/comments/2rehnr/havent_filed_tax_returns_in_4_years/cnf6427
Is there anything else I should do at this point? or am I awaiting the payment request to be approved? (about 15k owed)
[–]taxmankeithFAQ/Wiki Contributor 1 point  
I assume this
I then Certified Priority Mail via USPS (~$25) to the IRS and made a follow up call (about 2 weeks ago) to make sure everything landed in their hands (also, another hour wait time).
means we received the returns.
With a 15k balance due, the minimum payment would be about $208 per month. Your balance due will be significantly higher, though, with the assessments of Failure to File (FTF) penalties, Failure to Pay (FTP) penalties, and interest. Super-rough estimate would be $22k total, which would jump the minimum payment requirement on the past due years to $306 per month.
If you are still self employed, you need a plan for your ES payments moving forward and your balance due payments.
One of the conditions of an Installment Agreement (IA) is future compliance. A new balance due will, at minimum, default the agreement, and it's a $50 user fee to add this to the existing agreement.
If the balance due exceeds $25,000 in total, you may be subject to financial analysis (a detailed breakdown of your ability to pay) and a Notice of Federal Tax Lien.
Let me know if you have further questions.
[–]lilzero 5 points  
I just went through this for 2010, 2011, 2012, 2013.
After talking with an IRS rep (be prepared for an hour on hold, just to get someone), we discussed my situation and they gave me 30 days to file all four years.
I used freetaxusa's tools for 2010 and taxact for 11,12, `13. Keep in mind you are not able to file electronically for these years [anymore]. Total Cost: ~$100 bucks. I will continue using taxact for future filing because I feel they have a stronger brand, but I do feel that freetaxusa's tools were better organized (easier?). 

I then Certified Priority Mail via USPS (~$25) to the IRS and made a follow up call (about 2 weeks ago) to make sure everything landed in their hands (also, another hour wait time).
The entire process took a full 40 hours of time to complete (data entry, phone calls, finding docs, filing, etc). From what I've heard, HR would be around $125 per year.
The main difference here is that all my income was self-employment income. I didn't make estimated payments, so I also submitted a payment plan request over 6 years.
Hopefully your situation resolves itself quickly. good luck.
[–]bananasplits 2 points  
Hi! I'm dealing with a similar situation with my father (he's terminally ill which leaves me responsible for everything). Did you not face any penalties with the IRS then? Did you use your own records since you were self employed?
I'm looking at having to file 2010-present, and I'm just not sure whether I should wait until he passes (few months max) to handle it, or if it's better to start investigating now. Maybe /u/taxmankeith has insight too. (His main source of income was withdrawing from investments/early 401k/small side job) I'm just worried there will be a large tax bill, as he has very few liquid assets and I want to avoid a costly/lengthy probate if possible.
Any advice from anyone would be appreciated :-)
[–]lilzero 1 point  
Penalties from 2010-2013: I do not know yet (since i just filed). I assume I will and expect 1-2k in fines/interest. By example, I couldn't pay SE tax from 2008 (3k) and it ballooned to (5.6k) in four years.
As far as 'when' to file your dad's taxes...i don't know. I would err on the side of caution and start that conversation today...whether it be with the IRS or a tax lawyer.
[–]bananasplits 1 point  
Thank you for the response!
[–]taxmankeithFAQ/Wiki Contributor 1 point  
You can access your father's IRS information as a family member by completing Form 2848 Power of Attorney and Declaration of Representative (link to form and instructions).
After you complete the form, you will receive a letter from the processing unit providing you with a CAF number. This means your authorization has been entered on your father's IRS account.
From there, you can work with a customer service representative on the phone or in person, and determine the best course of action.
[–]swalsh411 3 points  
You can't file online; it will have to be paper. You also can't get any refund due for 2010; it's too late. You have until April 15 to file for any refund due from 2011. If this is a simple return with just W2 income you should be able to do this yourself no problem.
[–]recessionbeard 2 points  
That is a link to previous years' tax forms and publications.
Download one for each year, fill it out and sign it, and turn them in.
If you don't owe, you likely will receive a return for each year you did not file.


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