Tips for Filing Multiple-Year Tax Returns

If you haven't filed a tax return in several years, or if you filed incorrect tax returns and need to amend them, you could face significant tax problems. If the IRS owes you money, you might lose your tax refund. If you owe the IRS money, the agency might take collection action or, if you failed to file, recommend criminal prosecution. For all of these reasons, you can minimize your risk by filing your tax returns as soon as possible.

Gather Appropriate Documentation

Since filing late or amended tax returns might trigger an IRS audit, do your best to carefully document all information you report on your tax return. This might be difficult if you are filing returns for several previous years. If your employer can't provide you with previous W-2 forms, for example, you must calculate your income some other way -- using pay stubs or bank deposit records, for example -- and file Form 4852 along with Form 1040.

File Even If You Can't Pay

Failure to file a tax return can result in two negative consequences. First, the IRS may file a return for you without claiming deductions and credits that you may be eligible for. Second, since failure to file a return in a year in which you owe the IRS money is a crime, the IRS might recommend criminal prosecution. The IRS generally doesn't recommend criminal prosecution for taxpayers who file a return before they are notified that they are under criminal investigation, however. If you filed incorrect tax returns, you can amend them by filing Form 1040X.

Negotiate With the IRS For Past-Due Taxes

If you haven't filed a tax return in several years, or if you filed incorrect tax returns that misstated your tax liability, you might face a heavy tax burden. This burden will only increase over time, because the IRS continues to assess interest against overdue tax bills, including any assessed penalties. If you owe no more than $50,000, the IRS is likely to allow you to pay in installments. If you owe more than that, the IRS willl closely examine your finances before allowing you to pay in installments. Penalties and interest will continue to accumulate during the installment period, but the IRS won't take collection action as long as you keep up with your payments.

Claim Your Refund in Time

The statute of limitations for claiming a tax refund is three years, counting from the due date of the tax return in which you should have claimed it, or two years from the date you paid any taxes due. If you don't claim your refund by the deadline, you have in effect donated it to the IRS. The IRS will deduct any overdue amounts from other tax years from your refund.

Photo Credits

About the Author

Zacks Investment Research

is an A+ Rated BBB

Accredited Business.