Whether you’re a busy parent working a full-time job, a small business owner focused on operations or a real estate investor with multiple properties, paying taxes in Washington is required. Unfortunately, you can get sidelined with life’s priorities and not have the time to get them done. Dealing with a large amount of tax debt or complex assets doesn’t make the situation easier. If these situations resemble your current position, you’ll need to deal with unfiled tax returns at some point. Understanding the steps to make this process more efficient can be helpful.
Contact the IRS
The first step to take if you have unfiled tax returns is to see where you stand with the IRS. Contacting them might be scary, but it must be done to begin the process. Doing so will indicate if they have already started a delinquent return investigation. Ordering your Wage and Income Transcripts for the years unfiled should also be done. If the IRS has already filed a substitute for return (SFR), you may want to ask for more time to file your returns.
Determining the unfiled years
You’ll also need to know the number of returns that must be filed. IRS Policy Statement 5-133 states that six years of returns may be required to be in good standing with the IRS. However, this number may differ from the rule if there is a significant potential liability or a business is involved.
Filing your returns
File each return with the proper IRS unit. Doing so accurately is essential to ensure they match IRS records. Tracing your income history can help with this task.
Addressing balances owed and penalties
If you owe a balance on past taxes, penalties can be steep. Combining the failure to pay or file can reach a maximum penalty of 47.5 percent and 25 percent individually. Seeing if you qualify for the penalty abatement is an excellent choice if you’re in this position.
Following through with these four steps should help you get current with the IRS if you have unfiled taxes. Several types of arrangements can be made, depending on your specific circumstances.