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 Internal Revenue Service 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.
If you haven't filed taxes in several years, get up to date as soon as possible or you can face serious consequences. Contact a paid preparer, accountant, lawyer or even the IRS for back tax help if you need to.
Filing a Delinquent Tax Return
It's a myth that filing late or amended tax returns might trigger an IRS audit, but you should always still 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.
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 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 will 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.
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. To specify how you want to receive your refund, such as through direct deposit to one or more accounts, file Form 8888.
Amending a Tax Return
If you filed incorrect tax returns, you can amend them by filing Form 1040X. This form must be filed on paper, not online, and it can take weeks or months for the IRS to process. If you are owed a further refund on an amended tax return, it will be sent by paper check, not direct deposit.
2018 Tax Law Changes
The tax code is changing for 2018, but if you're filing or amending back tax returns, you should still use the rules and forms for the years you're filing for, not the new rules.
2017 Tax Laws
If you're filing a tax return for 2017 or a previous year, remember that the tax rates were higher, so you may owe more for those years than you will on your 2018 taxes.
- Internal Revenue Service: What to Know about Late Filing and Late Paying Penalties
- Internal Revenue Service: What to Do If You Haven't Filed Your Tax Return
- Internal Revenue Service: Additional Information on Payment Plans
- Internal Revenue Service: Instructions for Form 1040X
- Forbes: Amending IRS Tax Returns Has Extra Opportunities, Extra Risks
- Alvin Brown & Associates: Time Limitatations to Prevent the IRS from Collecting Tax and Levy
- Internal Revenue Service: Frequently Asked Questions for Past Due Return Filers
- Internal Revenue Service: Payment Plans, Installment Agreements
- Internal Revenue Service: Form 4852
- LawFirms.com: Penalties for Tax Evasion
- Internal Revenue Service: Form 1040X
- Internal Revenue Service: How to Get Your Prior Year Tax Information from the IRS
David Carnes has been a full-time writer since 1998 and has published two full-length novels. He spends much of his time in various Asian countries and is fluent in Mandarin Chinese. He earned a Juris Doctorate from the University of Kentucky College of Law.