FILING BACK TAXES: How Do I Manage My Back Taxes?

filing back taxes
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Taxes are inevitable. Anyone earning a specific amount of income is required to file an annual tax return. Depending on your age and filing status, the minimum amount of taxes to be filed ranges from $5 to $27,800. Even individuals who do not meet these requirements must file, especially if they expect a tax refund. Hence, skipping a tax filing date can have dire consequences. In this article, you’ll learn the process of filing back taxes with Turbotax. Also, if you want to learn how to file back taxes without records, we’ve got you covered.

What Are Back Taxes?

Back taxes are unpaid federal or state tax liabilities from a previous year. Federal income tax returns are normally due on April 15 of each year for the previous year. You can file for a six-month extension to file your taxes. Even if your extension is granted, you must still pay your tax bill by the due date. For most individual taxpayers, this is usually on April 15.

Filing Back Taxes

You must file a past-due return with the IRS if you owe back taxes. Although the process is comparable to filing a tax return on time, there are a few points to remember.

To begin, locate your tax forms and other financial data. The same information is required for a past-due tax return as for a regular tax return. Check to see whether you have any W-2s or 1099s from the year your back taxes were due. You should also obtain any receipts required for claiming income tax deductions or credits.

Whether you don’t have all of your documentation or aren’t sure if you do, you can ask the IRS for a tax return transcript. You have the option of receiving your transcript electronically or by mail. Transcripts are typically only available for the current tax year and the previous three tax years; however, taxpayers may request a transcript from an earlier tax year by submitting Form 4506-T.

Because of legislative changes, tax forms are frequently changed. When filing back taxes, use the original tax forms and instructions for the year you are filing. On its website, the IRS has a database of prior-year forms.

A past-due return, unlike a typical tax return, cannot be e-filed. You must ship your late return and payment to the postal address stated on Form 1040 or, if you got one, on an IRS late notice. Include any taxes payable from previous tax years with your payment. Until your unpaid payment is paid in full, it will continue to accrue interest.

You can utilize tax preparation software or hire an expert to help you complete your overdue return.

What If I Don’t File My Back Taxes?

If you owe taxes, you should file a past-due tax return as soon as possible. If you don’t file or pay your taxes on time, the IRS will start charging penalties on the amount you owe. The following are examples of penalties:

#1. Failure-to-File Penalty

If you miss your filing deadline and do not file an extension, the IRS applies a penalty of 5% of the amount of your unpaid taxes. The IRS will continue to charge an extra 5% per month for up to five months. Returns filed more than 60 days after their due date are subject to an extra late-filing penalty. If your return was due in 2021, your penalty is the full amount of your unpaid tax debt, or $435, whichever is less.

#2. Failure-to-Pay Penalty

If you fail to pay your taxes by the deadline, the IRS will assess a 0.5 percent penalty for each month your payment is late. The highest penalty for failure to pay is 25%. However, keep in mind that interest will accrue until your tax liability is paid in full.

In addition, there is a penalty for failing to pay estimated taxes, which are normally due on April 15, June 15, September 15, and January 15. The penalty for underpayments is 3% in the first quarter of 2023.

In addition to interest and penalties, not filing and paying your taxes might result in other hassles. For example, the IRS will not disburse refunds to past-due taxpayers.

Read Also: IRA VS 401K: Differences & Which One Is Preferable

Filing Back Taxes With Turbotax

Filing back your taxes with Turbotax may assist you in doing one or more of the following:

#1. Request a Refund

One practical reason to file a back tax return is to find out if the IRS owes you tax. While many people have federal income taxes deducted from their paychecks, sometimes too much is deducted. In some situations, filing a tax return may result in a tax refund that is deposited into your bank account.

#2. Eliminate Late Filing Penalties and Interest

Even if you can’t pay the balance you owe, filing a tax return on time is critical to prevent or minimize penalties. If you fail to file your tax return, you may be obliged to pay an extra 5% of the unpaid tax you were supposed to disclose for each month your return is late, up to a maximum of five months. There may also be minimum penalty limitations.

The IRS imposes yet another penalty for failing to pay your taxes. If you file on time but are unable to pay what you owe in full by the due date, you will be charged an extra 0.5 percent of the tax not paid on time for each month or part of a month you are late. These fees will continue to accrue until your debt is paid in full or the penalty exceeds 25% of your tax, whichever comes first.

#3.Have Tax Returns Available for Loan Applications

Certain loans, such as mortgages and business loans, may demand income evidence as part of the approval process. Filing your tax returns before applying for a loan makes the procedure go more smoothly.

#4. Pay Social Security Taxes in Order to Be Eligible for Benefits

Self-employed people must pay Social Security and Medicare taxes on their personal income tax filings. You record your income by filing a return and paying the accompanying taxes so that you can qualify for Social Security retirement and disability benefits, as well as Medicare benefits when you need them.

Filing Previous Year Taxes With Turbotax

Filing a tax return for the prior year isn’t as difficult as you might imagine, but it does necessitate a few steps.

#1. Obtain Information

The first step is to gather any information from the tax year for which you want to file a return. Gather your W-2s, 1099s, and any information for any deductions or credits you may be eligible for. Check the tax forms you’ve gathered for the year of the tax return you’re filing to ensure you’re using the correct ones.

#2. Ask the IRS for Tax Papers

Some people may have difficulty locating records from past years. Fortunately, the IRS offers a form that you may use to request any tax information they have on file for you for a specific year. Even if you haven’t filed a tax return, Form 4506-T permits you to request a transcript of your tax return information. You can obtain information for the previous ten tax years.

The IRS will submit the information it has on file, including information from W-2s, 1099s, and 1098s. It won’t include information about any deductions or credits you may be eligible for, so you’ll still need to do some research on your own.

#3. Finish and File Your Tax Return

Once you’ve gathered all of the necessary forms, make sure to utilize the tax forms from the year you’re filing. To file a 2018 tax return, for example, you must utilize 2018 tax return forms. These documents are available on the IRS website. When filling out a tax return by hand, patience is essential. Fortunately, you may also use TurboTax to file tax returns from earlier years.

To begin, choose the year for which you want to file a return.

Then, enter your tax information, and TurboTax will fill out the tax forms correctly.

Previous year tax returns must be printed and mailed in because online filing for prior year taxes is not an option with TurboTax.

Remember, TurboTax will ask you simple questions about your life and assist you in filling out all of the necessary tax forms. TurboTax ensures that the process of filing your taxes is done correctly, from simple to complex tax returns, regardless of your scenario.

What Tax Documents Are Required For Filing Back Taxes?

You’ll need as many relevant tax records for the years you didn’t file as you can find.

If you want to file your taxes but you don’t have records of your previous year’s tax paperwork, you can seek them from the IRS by filing Form 4506-T, or you can contact your employer or the institution that would have delivered them to you.

Keep in mind that current or past employers or other businesses may no longer have these documents on file, or they may be difficult to access. If you choose this option, you may have to pay a fee.

How To File Taxes Without Records

Whatever the cause for your tax delay, it’s always advisable to file your tax return on time if possible. This will make your life easier and ensure that your taxes are appropriately evaluated, as well as prevent the associated failure to file penalties.

However, if you do not have the records that you require to file your taxes, the process of catching up on your tax returns can be complicated and time-consuming. Here’s what you can do if your records are missing and you need to file your back taxes as soon as possible.

#1. Request a Transcript From The IRS

If you are unable to obtain copies from the payers, request a tax transcript from the IRS. Many companies and banking institutions (as well as other types of payers such as publishers and freelancing work platforms) now make your tax forms available online. Many will allow you to access these forms at any time, but this information is sometimes only available for a limited period. If the company has gone out of business, obtaining these documents directly from the source may be difficult or impossible.

If you are missing records to properly file your back taxes, the Wage and Income Transcript is what you need. You can request information dating back up to ten years.

#2. Examine Your Financial Records Thoroughly for Items That Are Not Reported on Tax Transcripts

If you work by yourself, it’s possible that you don’t obtain 1099 forms from every client. You must still record any income that does not appear on a tax transcript as well as all business costs.

If you need to gather this information, begin with the following areas:

  • Account statements
  • Data from digital payment processors (I.e. PayPal, Venmo)
  • Statements for credit and debit cards
  • Receipts through email
  • Receipts on paper
  • Checks that were canceled
  • Slips of paper

Even if you are not self-employed, you may have income from personal property transactions or a winning lottery ticket that must be recorded. You may also be overlooking important deductions such as health insurance and medical bills, charitable contributions, and student loan interest payments. 

#3. Make a Spreadsheet 

If you are self-employed, you should open separate bank, credit card, and payment processor accounts so that your business expenses are easier to distinguish from your personal expenses and, as a result, more likely to be deducted.

Can I file US taxes from previous years?

It’s unfortunate that there’s a time limit on filing tax returns for refunds and credits. You must file your tax return and request a refund no later than three years after the date the return was originally due.

How do I file late taxes in Canada?

As long as you follow the same procedures, filing your tax return late is the same as filing it on time. You can mail your taxes to the CRA using tax software, a professionally prepared tax return, or by filling out and mailing in the CRA’s General Income Tax and Benefit Package.

Is it too late to claim tax refund?

You have only three years from the original deadline, usually in April, to file for your refund after it becomes available, per the law. Some people may opt-out of filing a tax return because they did not make enough money to be subject to filing. They will not be charged a fee if they are entitled to a refund.

What happens if you don’t file taxes for 5 years?

Large fines and jail time are possible consequences. Fortunately, there is a time limit on when the government can file criminal charges for tax evasion. In the event that the IRS decides to press charges, it must do so within six years of the original tax return’s due date.

How far back can the IRS go for unfiled taxes?

If you haven’t filed a return, the IRS can still audit you even if the deadline has passed. The IRS typically only looks at unfiled tax returns from the previous six years. However, it can legally look back in time indefinitely.

Does the IRS look at every tax return?

In most cases, the Internal Revenue Service simply accepts and processes tax returns as submitted. However, there are a number of things that may cause the IRS to take a closer look at a return, either through a correspondence exam or by assigning an auditor to investigate further.

What are the time limits for claiming back tax?

After the close of the tax year in which the overpayment occurred, you have four years to file a claim for a refund. If you fail to file your claim within the specified time frame, you will not receive any refund for that tax year.

In Conclusion,

It’s important to stay on top of things after filing your taxes. You can contact the IRS and request an update to ensure that your back taxes are being processed. You can also ask for account transcripts or inquire about any pending concerns with your account. If your records are missing, we have outlined steps you can take to enable you to file your taxes.

Filing Back Taxes FAQs

How many years can you go back to file your taxes?

If you are due a refund for withheld or estimated taxes, you must file your return within three years after the due date to receive it.

What is the oldest tax return I can file?

You can do it at any time, but if you wish to claim a refund for a tax year, you only have three years to file, and the IRS may take action against you after six years.

Can you go to jail for not filing taxes?

A Jail sentence is one of the penalties for not filing a tax return.

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