This tax season, you may be facing not just this year’s returns but also an overdue return from a previous year. It’s important to stop overlooking or putting off filing a previous year’s return– the IRS keeps track of all required returns (whether filed or not) and can take action against those with unfiled returns.

Paying back taxes and putting your account in good standing is not difficult and well worth doing…. but the IRS only allows claims for refunds and tax credits for three years after a return’s original due date.

Why Timely Filing is Important

The IRS considers you in good standing if you have filed the last six years of tax returns. If you didn’t file on time—or request and receive an extension—you could be charged penalties and interest, which can quickly accrue over time. Even if you can’t pay the balance you owe from a previous year, it’s still important to file a return as the IRS charges interest and possible penalties on overdue taxes. These fees can quickly pile up, and interest can continue to accrue even when penalties max out at 25% of the taxes owed.

In addition, you risk forfeiting a refund you may be due if you don’t file a return.

Filing back taxes and paying any associated taxes that are due can help you qualify for social security retirement, disability benefits, and Medicare benefits when you need them in the future. This is especially important for those who are self employed;  any self-employment income earned is not reported to the Social Security Administration.

Tax returns for past years are also often required for any loan applications you may submit, such as mortgages.

You may have qualified for federal tax credits or refunds during a year you did not file. You may still be able to collect the money that is due you if you file within three years of the original due date. If you don’t file, the IRS may complete a substitute return for you—and they won’t factor in any tax deductions or credits you may have qualified for. This return, with the IRS’ proposed assessment, will lead to a tax bill that will trigger a collection process if it is unpaid. This might include a levy on wages or bank accounts or the filing of a notice of federal tax lien.

If you repeatedly do not file, you could be subject to additional enforcement measures, such as penalties and/or criminal prosecution.

How to File Late

The first step in preparing to file an overdue return is to gather all the information you may need, just as you would for a current tax return. This includes W-2s, 1099s, and details on deductions or credits you may qualify for.

Tax return forms are year-specific–a different form every year. It’s important to use the correct tax for the year you are filing.

You can confirm your information with the IRS before filing your return. Information, such as W-2s and 1099s that have been submitted to your account are available from the last 10 years.

If you don’t have the funds for the taxes due, the IRS offers several tax relief options, including offers in compromise, penalty abatement, and payment plans. If you can’t pay what you owe, you can request an additional 60-120 days to pay your account in full.

We Can Help

Having back taxes and overdue forms hanging over your head may seem daunting, but correcting these issues can be easily accomplished–with the help of tax professionals. The team at Dembo Jones is available to address and resolve any issues with you so you can move ahead without the burden of late forms and any growing overdue tax bill.