Resolving Multiple Years of Unfiled Tax Returns

By: Moshe Klein, The AFFORDABLE Accounting Firm

Falling behind on filing your tax returns can be stressful, but it’s essential to address the situation promptly. Whether you missed filing for one year or several, taking steps to resolve unfiled tax returns is crucial to avoid penalties, interest, and potential legal consequences.

1. Assess the Situation
Before diving into the resolution process, assess the extent of your unfiled tax returns. Gather information on the years you missed filing, including income, deductions, and any relevant documentation. Understanding the scope will help you create a plan moving forward.

2. Gather Necessary Documents
Collect all relevant documents, such as W-2s, 1099s, and other income statements. If you don’t have copies, request them from your employers, financial institutions, or the IRS. Having accurate records is essential for accurate filings.

3. File the Missing Returns

1. Prioritize the Oldest Years
   Start by filing the oldest unfiled tax returns first. The IRS considers the most recent years a priority, so work backward from there. Use the appropriate tax forms (e.g., Form 1040) for each year.
2. Calculate Taxes Owed

   Determine your tax liability for each year. If you owe taxes, pay them promptly to avoid additional penalties and interest. If you’re due a refund, you won’t face penalties, but it’s still essential to file.

3. Penalties and Interest

   Understand that penalties and interest accrue on unpaid taxes. The sooner you file, the less you’ll owe in penalties. The IRS charges a failure-to-file penalty (5% per month) and a failure-to-pay penalty (0.5% per month).

4. Consider Professional Help
If dealing with multiple years of unfiled tax returns feels overwhelming, consider seeking professional assistance. Enlist a tax professional or CPA to guide you through the process, especially if you have complex financial situations.

5. Request Penalty Abatement
If you have a valid reason for not filing (e.g., illness, financial hardship), you can request penalty abatement. Write a letter to the IRS explaining your circumstances and ask for leniency. They may reduce or waive penalties based on your situation.

6. Stay Current Moving Forward
Once you’ve resolved the unfiled returns, commit to staying current with your tax obligations. File your returns on time each year and pay any taxes owed promptly.

Resolving multiple years of unfiled tax returns requires diligence, organization, and timely action. By addressing the issue head-on, you can minimize penalties and ensure compliance with tax laws. Remember that seeking professional advice is always a smart move when dealing with complex tax matters.

Since 1982, Moshe Klein & Associates, Ltd. has been providing AFFORDABLE tax and bookkeeping services to small businesses and individuals in all 50 states. For a FREE & CONFIDENTIAL consultation to discuss your options, please contact our office by phone at 888-432-8187 or visit our website.