How Far Back Should I Go on my Unfiled Tax Returns
“I Have Unfiled Tax Returns-How Far Back Should I Go With My Filings?”
You have not filed your tax returns with the IRS for several years, and want to close this issue up with the IRS. But how many years of non-filed returns do you need to prepare to satisfy the IRS? All returns or only some?
The good news is that the IRS does not require you to go back 10 years on your unfiled tax returns.
In most cases, the IRS requires you to go back and file only the last 6 years of tax returns to get back in the system. And then, to make an agreement with the IRS to address any taxes owed. The 6 year enforcement period for delinquent returns is found in IRS Policy Statement 5-133 and Internal Revenue Manual 18.104.22.168.18.
Part of the reason the IRS requires six years is the lack of resources– the IRS cannot administer and staff the enforcement of unfiled tax returns going back as far as 10 or 20 years. Secondly, IRS’s records do not go back that far-or if they do they are seldom accessible. The IRS is looking to find balance with the compliance issues related to filing that is consistent that is consistent with internal resources. They also are looking for a good faith effort at compliance from taxpayers to get current.
What to do with the issue of payment? The IRS offers several programs, including installment agreements, offer in compromise settlement, and even currently not collectible status (where your current resources are not sufficient to make a payment). In some situations, bankruptcy can eliminate or discharge the taxes.
Bear in mind that this is a general rule. The IRS can seek enforcement of filing for greater than 6 years if there are special circumstances, such as self-employment income, income from illegal sources or the hiding or concealing assets.
The unfiled returns are generally a civil issue (not criminal) that simply requires the filing the last 6 years’ tax returns and then making an agreement with the IRS to repay what you owe. However, there may be significant penalties and interest involved in this filing if there are large balances of taxes owing.
Criminal cases usually involve a level of income, sophistication and planning that show an intent beyond the good faith reason why you probably did not file-lack of records, medical issues, divorce, family complications, fear or simple procrastination.
You do not have to have your life on hold by unfiled tax returns. The path to a fresh start is the last 6 years’ returns and a repayment plan for the taxes. You do not have to be in a constant state of worry and inaction from the task of getting this behind you, and getting your life back in control. This process may be easier than it first appears!