If you haven’t filed your taxes in 10 years, it’s crucial that you take quick action to resolve this situation and avoid severe penalties. To start, check your status with the IRS and calculate how much you owe. You can then figure out how to resolve it by paying in full or negotiating with the IRS.
Whatever you do, don’t ignore the situation. You don’t want the IRS to think you’re trying to evade paying your taxes. Below, we’ll guide you through the necessary steps to bring your tax status up to date and avoid common pitfalls that could complicate your situation further.
What to do:
- Check your status with the IRS
- Calculate how much you owe
- File your tax returns
- Negotiate with the IRS
- Make any required tax payments
- Hire a tax expert
What not to do:
- Ignore the situation
- Evade paying taxes
Table of Contents
What do I do if I haven’t filed taxes in 10 years?
If it’s been a decade since you last filed your taxes, don’t panic. Correcting this oversight involves several actions: verifying your filing status with the IRS, determining how much you owe, and addressing any unfiled tax returns.
Understanding your options for negotiation and payment with the IRS can help you manage the situation.
For those with complex tax situations or substantial liabilities, consulting with a tax expert can be a way to get back tax help and potentially reduce your tax burden. These professionals are equipped to navigate the IRS processes and ensure compliance with tax laws.
If a new client hasn’t filed taxes in the past 10 years, they may have accrued significant penalties and interest, faced potential liens or wage garnishments, and encountered challenges in retrieving income documents. Due to the statute of limitations, if they are owed refunds, they can only claim those from the last three years. The first step I recommend is consulting a tax professional, who will likely advise filing the most recent six years of returns. To prepare, begin gathering income statements from all sources as soon as possible.
Check your status (Did the IRS file a substitute tax return?)
Start by contacting the IRS to check whether it has filed a substitute for return (SFR) for any of the years you missed. An SFR is the agency’s estimate of your taxes based on reported income information. However, it likely won’t include all the deductions and credits you might be eligible for.
To review what has been filed, including any SFRs, and obtain transcripts of your returns, you can take the following actions:
- Access your tax records online: Create an account, or log in to your account, on the IRS website. This online portal lets you view your tax transcripts, check what you owe, and access other tax history details.
- Request a transcript by phone or mail: If you prefer to receive your transcripts by mail, call the IRS at 1-800-908-9946, or send Form 4506-T to request the documents.
- Consult a tax professional: For personalized guidance, consider engaging a tax expert, such as an accountant, tax attorney, or tax relief company. These professionals can provide detailed advice and manage communications with the IRS on your behalf.
Knowing what has been filed will help you determine what needs to be addressed. Even if the IRS filed an SFR on your behalf, we recommend filing a complete return yourself, so you can claim all applicable deductions and credits, potentially reducing your overall tax burden.
Calculate how much you owe
The next step is to prepare your tax returns for each year you missed. Start by downloading the tax forms for each year from the IRS website. Carefully fill out each form, ensuring all income, deductions, and credits are accurate according to the instructions provided with each tax form.
For those who prefer using technology, some online tax software supports filing past-due returns. However, the availability of forms for certain back years may be limited; some platforms don’t support back tax filings for every past year.
In complex tax situations, it’s wise to seek the expertise of a professional tax preparer or certified public accountant (CPA). A tax professional will ensure the accuracy of your filings and assist in calculating your total liability, including any penalties.
File your tax returns
It’s imperative to file your past-due tax returns ASAP. Start with the oldest year you owe and work your way to the present. This approach helps reduce accumulating penalties and shows the IRS or state that you intend to comply with tax laws.
Be sure you use the correct forms for each year, which you can find on the IRS website. Tax forms change annually, so you must use the appropriate version for each year you missed. If you owe more than you can afford to pay, file the returns anyway.
This step will show your effort in resolving the issue. After filing, you can explore options with the IRS to manage your outstanding debt.
Negotiate with the IRS
If you can’t pay the total amount due, the IRS offers options such as payment plans or an Offer in Compromise (OIC), which allows you to settle your debt for less than you owe. Contact the IRS to discuss your situation and find out which options are available to you.
For those experiencing financial hardship, be prepared to show detailed documentation to back up your claims. The IRS will review these documents as part of the OIC approval process to determine your eligibility.
Make any required tax payments
As you file your back taxes, begin making payments toward your debt. Even if you can’t pay in full, paying any amount is better than nothing; it shows your commitment to resolving your tax issues. Each payment reduces your balance and the amount of interest and penalty charges.
The IRS offers multiple payment plan options to help taxpayers catch up. Depending on your situation, you may qualify for an installment agreement allowing you to pay over time.
You can even apply for a payment plan online through the IRS website, making it easier to set up and manage payments.
Hire a tax expert
Dealing with back taxes can be complex, especially if the amounts you owe are substantial or your tax situation is complicated. Hiring a tax expert, such as a certified public accountant (CPA), a tax attorney, or a company specializing in tax relief, can provide valuable guidance.
These professionals can help you navigate the IRS’s processes, ensure your tax filings are accurate, and may even reduce your overall tax burden.
If you’re feeling overwhelmed by back taxes and the complexity of dealing with the IRS, Anthem Tax Services is here to help. Its team of experienced tax experts makes the process easier by handling all the paperwork and negotiations for you. Whether you need help setting up a payment plan or applying for an Offer in Compromise, Anthem Tax Services works directly with the IRS on your behalf. With clear communication and personalized support, they take the stress out of tax resolution so you can focus on getting back on track financially.
By leveraging the expertise of a tax professional, you can ensure your filings are accurate, explore all available relief options, and mitigate the impact of penalties and interest on your finances.
What should I NOT do if I haven’t filed taxes in 10 years?
If you haven’t filed your taxes in 10 years, it’s critical to avoid ignoring the issue or attempting to evade your tax responsibilities. Both actions can lead to serious consequences, making an already complex situation worse.
Don’t ignore it
Ignoring unfiled taxes can lead to accumulated penalties and interest that significantly increase your debt. The IRS may enforce collection through wage garnishments, bank levies, or liens on your property. In severe cases, the IRS may even pursue a criminal investigation.
Addressing the situation as soon as possible is essential to minimize or prevent these punitive actions and get your taxes caught up.
Don’t evade paying taxes
Evading taxes by underreporting income, claiming false deductions, or hiding money is illegal and considered tax fraud. Such actions can result in hefty fines, criminal charges, and even imprisonment.
Instead, seek legitimate avenues for reducing your tax liability, and comply with the IRS to get your taxes in order.
Are you in trouble if you have 10 years of back taxes?
Having 10 years of unfiled taxes can lead to serious financial and legal consequences. The IRS imposes a failure-to-file penalty of up to 5% of the unpaid taxes for each month or portion of a month that a tax return is late, up to a maximum of 25% of the unpaid taxes.
Plus, a failure-to-pay penalty of 0.5% of the unpaid taxes might apply for each month (or portion of a month) the tax remains unpaid. This penalty is also capped at 25%.
Beyond penalties, the IRS may initiate collection actions such as wage garnishments, bank account levies, or property liens to recover unpaid taxes. These measures can damage your financial stability and creditworthiness. If convicted of tax fraud, you could even face jail time.
Addressing your back taxes right now is crucial to mitigate these escalating penalties and legal risks. Filing your overdue returns and arranging payment plans or settlements with the IRS can help resolve the situation.