Haven't Filed Taxes in Years? What to Do First

Haven’t Filed Taxes in Years? What You Need to Know

If you haven’t filed taxes in years, you likely feel your stomach drop with a mixture of fear and shame every time you think about the IRS or see a notice come in the mail. People often worry that they’ve waited so long that the IRS is days from seizing their bank accounts or putting them in jail.

But the truth is that you are not alone, you have options, and you do not have to handle this problem on your own. Getting behind on filing your returns is extremely common, and it’s much more fixable than you think. Millions of Americans fall behind on taxes at some point in their lives, thanks to cash flow issues, job changes, lost paperwork, and health struggles.

What matters is that you take the right steps now to get caught up and get compliant. Having the right tax professionals beside you can make this process much less stressful. Call BestTaxPro™ at 763-477-4205 to discuss your concerns during a confidential consultation.

Key Takeaways

• Not filing taxes is generally handled as a civil issue, not a criminal one.
• IRS criminal prosecutions for non-filers are very rare and generally involve willful fraud.
• You may only need to file six years of returns to become compliant.
• Refunds expire after three years, so waiting can cost you money.
• Working with a tax professional can help you get caught up.

Why People Fall Behind on Taxes

Everyone has their own reasons for forgetting to file tax returns or falling behind on payments, which may include:

• Inability to pay and not filing to avoid a bill.
• Mental or physical health concerns.
• Life changes that push taxes to the back of the priority list.
• Financial changes that complicate paperwork and filing, for example, starting a side business or earning investment income.
• Countless other reasons.

It’s very rare that people intentionally, willfully, and maliciously fail to file their returns, and the IRS knows that.

Criminal Charges vs. Civil Enforcement

People view the IRS as one of the scariest and most powerful government agencies, and it’s true that it does have a lot of legal power. However, the IRS isn’t here to kick taxpayers while they’re down, intentionally cause financial hardship, or throw people in jail at the first sign of non-compliance.

The IRS only prosecutes non-filers in rare cases, usually involving:

• Willful tax evasion
• Falsified records
• Hidden income sources and offshore accounts
• Repeated and intentional refusal to comply with IRS requirements after multiple warnings

The vast majority of the time, the IRS just wants the money you owe, and they’d rather not pursue criminal charges. The IRS pursues surprisingly few criminal cases per year; in fiscal year 2024, the agency opened just 1,600 new cases. In comparison, the IRS sends about 210 million notices to individuals and businesses each year related to civil concerns of unpaid taxes or unfiled returns.

Civil penalties are the far more likely outcome of any given IRS interaction. The IRS sees a very clear difference between non-filers who don’t have the funds to pay or don’t have the bandwidth to handle tax filings and non-filers who are intentionally attempting to defraud the government.

How Many Years Do I Need to File?

Your next steps depend on how far behind you are. Here’s a look at the returns you should file in various scenarios:

• One year behind – file your return as soon as possible. The IRS may add the failure-to-file and failure-to-pay penalties to your bill, but if you’ve been compliant for the four previous years, you should be able to get those penalties waived.
• Two to three years behind – If you are two to three years behind, you have a bit more work to do, but you’re still in relatively safe territory. Additionally, you can still receive tax refunds for returns that are late by up to three years.
• Four to six years behind – If you have to file four to six years of tax returns, it will take quite a bit of time, but once you’re done, you’ll be fully compliant with IRS requirements.
• More than six years behind: Typically, you only need to file the last six years to get into compliance, but in rare cases, you may need to file older returns if you have high income (and the IRS requires more years of returns) or if you want to correct a tax assessment from a substitute for return.

Bottom line – generally, the IRS requires the last six years of returns to consider you compliant. Your right to seek a tax refund expires three years from the return’s original due date.

Why You Should Act Now – Not Later

Odds are good that you’ve been carrying the stress and uncertainty of unfiled tax returns for years. You deserve the mental peace that comes with being caught up and no longer worrying that the IRS is going to discover that you’re behind. Here’s why you should act now:

To minimize penalties

Many penalties, including the failure-to-file penalty, accrue every month until the issue is addressed. Additionally, you pay interest on penalties. That interest compounds daily. By filing now, you limit what you ultimately pay in penalties and interest.

To avoid a substitute for return

If you don’t file, the IRS may use a Substitute for Return to calculate the tax they think you owe. However, they are based only on the information provided to the IRS, such as W-2s, 1099s, etc. They don’t account for any credits or deductions (aside from the standard filing deduction of single or married filing separately), which generally results in inflated tax bills. If you don’t file, the IRS can go back an unlimited amount of time to issue an SFR.

To prevent involuntary collection actions

Taking action now can also help you avoid liens, levies, wage garnishments, and the loss of your valuable assets. If you don’t file, the IRS may use the SFR to calculate your tax due and then start the collections process. If you file, you can see exactly what you owe and make payment arrangements to avoid collection actions.

To claim refunds

If you are still owed refunds, filing as soon as possible may allow you to get that money back while catching up. You can only claim the last three years of refunds, but you certainly don’t want to leave that money on the table.

To get into compliance with IRS resolution options

Most IRS resolution options, including installment agreements and offers in compromise, require you to have the last five years of returns filed. You won’t be able to make payment arrangements if those years aren’t filed.

To find peace of mind

Many people further delay filing because they are overwhelmed at the thought of digging through tax paperwork and fearful that the IRS will take more aggressive action against them after they file. However, filing puts you in a position where you can actually work with the IRS – instead of worrying that they’ll come after you for the unfiled returns.

While going through this process can be stressful, the relief that you feel afterwards is like taking a massive weight off your shoulders. Most non-filers are just regular people who fell behind due to life changes, financial stress, or other common concerns. The IRS knows that and makes it easy to catch up.

How BestTaxPro™ Can Help

Getting caught up might seem like an impossible task, especially if you aren’t exactly sure where your old W-2s, 1099s, and deduction tax forms are. That’s why hiring a tax professional in St. Paul or Minneapolis should be your first step. Tax professionals deal with situations just like yours all the time, and what seems like an impossible job to you is light work for them.

Clients at BestTaxPro™ work with Joshua Webskowski, an Enrolled Agent and US Tax Court Practitioner (USTCP) who has handled a wide range of IRS and Minnesota Department of Revenue problems on behalf of clients. His unique experience as an Enrolled Agent, Certified Financial Planner, and USTCP lets him help taxpayers across the country navigate unfiled tax returns, unpaid taxes, and aggressive collection actions.

He’ll begin by filing your back returns, either by gathering and using your original documents or reconstructing tax returns from available forms and receipts. Once your taxes are filed, he’ll help negotiate payment arrangements that fit your budget and help you get back into compliance. You can protect your income, assets, tax refunds, and peace of mind with just one call.

Don’t let unfiled tax returns keep chipping away at your mental well-being. You could be caught up and worry-free in a matter of days or weeks with our help. Call BestTaxPro™ at 763-477-4205 or fill out our online contact form to schedule a confidential consultation that will empower you to get back on track.