If you find yourself behind in your Federal tax return filings you are not alone. The recent recession has led many Americans to unfortunately make filing a low priority. A taxpayer may want to “become whole again” and may wonder what to do. There are a number of options through which a taxpayer can become compliant without emptying the checking account. Every situation is unique but here are 4 steps for filing back taxes:
- Determine Which Years To File Narrowing the number of years will make this process less daunting. See what copies of filed returns you have in storage. If you are not sure, contact the IRS AND the state and ask them.
- Get Documentation Next thing that you will need to do is to acquire documentation for all years that remain unfiled. You’ll need W-2s, 1099s and all other income documentation for each year. If any of this is unattainable, a transcript can be acquired from the IRS. A transcript details income information that has been reported by banks, brokers & other financial institutions, other miscellaneous sources as well as employers regarding wages and Federal Withholdings. In addition, you will need to collect documentation regarding any expenses that you wish to write off or any dependents to claim as an exemption. Since these are not reported, IRS will not be able to provide them to you. However, the more allowable expenses that you can document the more tax savings you will enjoy.
- Consider A Qualified Tax Professional Find someone who is experienced with handling filing multiple years at the same time. The tax professional may negotiate a resolution that saves you money, avoid hostile action from a government office, find tax reductions to lower the tax bill, or know how to file multiple returns so they are processed correctly. A wise move would be to hire a tax professional (CPA or EA) who is allowed to practice before the IRS and can speak directly to them to hasten a resolution.
- Payment Options Once it’s been determined if you have a tax liability (remember that you could have a refund due and not even know it), it’s time to determine a method of payment that fits your budget. If you’re financially unable to pay your tax debt immediately, you can make monthly payments through an installment plan. The IRS also offers a Partial Payment Installment Agreement in which you have a long term payment plan to pay off the IRS at a reduced dollar amount. If your financial situation is a bit tougher then there may be other options available to you as well. This is where having a qualified tax professional accustomed to negotiating with the IRS can really payoff. A good tax professional may be able to do to reduce what you owe or assist with an affordable payment plan.
You can prepare and file your tax returns on your own, and try to come up with a settlement with IRS or the state without any help. You run the risk of unreporting income because of the challenge of reading IRS transcripts, miss deductions because you are not sure what is allowable under your circumstances, make errors when preparing multiple returns at the same time, filing old returns wrong so they are not processed correctly, AND not knowing how to negotiate a favorable settlement.
Don’t procrastinate any longer!Â Interest and penalties accrue daily! Hostile action could be taken any time!
Are you aware of the Missouri Tax Amnesty program? This is a one-time opportunity to settle with the state of Missouri for back taxes. The deadline is soon–November 30, 2015.
Kasperek & Co. Accountants has had the satisfaction of solving back tax problems for people for almost 30 years.