Filing back taxes can be a daunting task, but there are ways to lessen the pain. Whether you’re looking to avoid penalties and fines or just trying to get your life back on track on a tight budget, it’s worth taking these tips into consideration before you take that important step. For starters, filing your taxes late is a crime. If you can’t pay in full, then there are solutions. The IRS has a payment plan that you can take advantage of. You’ll get a set amount of time to make payments every month until you’ve paid your bill in full. And even if you don’t have the money to pay it all at once, paying what you can get the ball rolling and keep them from charging fees for paying late or missing deadlines.
If there is money you know you won’t have access to for a while, then there are also options. You can either place it into an interest-bearing account with the IRS or with a bank. The money will be safe and earn interest until you need it again. Or you can opt to open up a certificate of deposit that the IRS can seize if they need the money while keeping it out of your hands until they’re ready to give it back. Here are the tips for filing back taxes.
1. How Far Back Can You File Taxes?
The IRS has rules and restrictions on how old your taxes have to be in order for you to file. For instance, the IRS says your tax return must be filed within three years of the tax year it covers. The same rules apply to extensions that you might request. The IRS also has rules for how far back in time you can file. They say any tax return that is more than three years old can no longer be accepted by the IRS. So, if you do have taxes that are older than three years, you need to file a new one.
2. Ask for a Transcript When Preparing Your Back Taxes:
If you need to file back taxes on an old return, it is a good idea to get a copy of the tax transcript. A transcript will show you what you reported on your tax return, including any errors that occurred. If there are any errors that need to be fixed or changed, then this is the time to do it. It’s best to do this before you hand in your return rather than after.
3. Learn If the IRS Filed a Return For You:
This is something that will make filing back taxes a lot easier if you find out upfront. If the IRS has already filed a return for you, then you will have to get a copy of your tax transcript and see what they did. Sometimes they can help with errors that may have occurred on your return. If they filed a return for you, there’s no need to worry about mistakes or missing information since the IRS already took care of it.
4. Set Up a Payment Plan if You Can’t Afford Taxes:
Having to pay back taxes is no fun, and having lots of money tied up in penalties isn’t either. If you can’t pay back taxes in full, then at least you can avoid these penalties by setting up a payment plan. You will get some time to make payments down until the debt is paid off. You don’t have to worry about interest charges or late fees since the IRS will work with you on this one. If a payment plan is something that interests you, then it’s definitely worth looking into.
5. Request Penalty Abatement if You Qualify:
The best thing to do before filing back taxes is to research if your case qualifies for penalty abatement. If you think you qualify, then it’s definitely worth a shot. Even if you’re told no at first, you can always call them back later and ask again. The IRS has been known to change their mind about this fairly regularly. If a penalty is the one thing keeping you from being able to pay off your tax debt in full, then it’s definitely worth looking into.
6. Don’t Ignore the IRS:
Let’s say you do have a tax debt that you can’t seem to pay. Then at least don’t ignore it. Ignoring the IRS can result in fines and penalties that only grow bigger and bigger and eventually ruin your credit. It may not be the best idea to file your taxes late or use a back tax payment plan, but at least pay attention to what they say and keep track of their correspondence. They may actually help you once they’ve caught up with you.
No matter what you decide to do about filing back taxes, the first step is to realize that it’s a serious issue. If you have huge debts, then filing taxes late is an extremely important decision. If you’re looking at paying off your tax debt within the next several years, then setting up a payment plan that works for both you and the IRS can be a good idea. So, if you are looking for advice on filing back taxes, don’t forget that there are plenty of options out there.
If you want to learn more about filing back taxes, refer to this article from a law firm that understands tax laws and handles past-due tax returns.