What Do I Need to File Back Taxes?
If you are required to file and pay taxes but fail to do so, the IRS can file a return for you and charge you with expensive penalties and interest.
Even if you can’t pay all your taxes, you should still file and pay as much as you can. This will prevent the IRS from charging you with a failure-to-file penalty, which can be as much as 25 percent of your tax bill. In some cases, the IRS may waive penalties altogether and offer you an installment payment plan if you show a good-faith effort to pay your taxes.
Places to File Back Taxes
There are several places that you can file back taxes.
To begin with, you can download the forms that you need from the IRS website and file your back taxes yourself. For most filers, this will mean downloading form 1040 and any schedules and worksheets that are needed from the IRS archives. Keep in mind that the tax year you need to download is not the year in which you should have filed your taxes. Rather, it is the previous year.
If you are not comfortable with filing your own back taxes, you should be able to find a nearby tax professional who will be glad to file your back taxes for a fee. Most filers should expect to pay between $176 and $273 for such services.
You can also file your back taxes yourself by using one of the many online tax filing services. While such names as TurboTax, H&R Block, and Jackson Hewitt have been around for many years, the arrival of new online tax filing services has led to a reduction in prices. Several of the newer services, such as FreeTaxUSA and TaxSlayer, are offering their services for free. To remain competitive, most of the big names are now offering free versions.
However, that may not be the case for filing back taxes. Some online tax services charge a fee for filing back taxes while others do not. Since you are not filing the current year, you will not be able to e-file. You will have to complete your return online, print it out, and mail it to one of the regional IRS offices. You can find the correct address on the IRS website.
Costs of Filing Back Taxes
Although filing back taxes is the right thing to do, it can be costly.
As previously mentioned, the IRS can charge you penalties for filing late. Such penalties are usually five percent of your unpaid tax bill for any month or partial month that your taxes remain unpaid. Once your return is 60 days past due, you will be hit with a minimum penalty of $135 or 100 percent of your unpaid tax bill if the amount is less than $135.
To avoid these penalties, you should file an extension if you are not able to file your taxes on time. Although this will not give you more time to pay your taxes, it will eliminate any late-filing penalties provided that you file your return within the next six months. However, you may still be hit with late-payment penalties if your taxes are not paid on time. This combination of late-filing penalties and late-payment penalties can be very costly.
If you have a tax refund coming but owe back taxes or fail to file your taxes on time, you may find that the IRS will confiscate your refund and apply it to your back taxes or to your late-filing penalties. Paying taxes is bad enough without having to pay penalties and interest, which only serves to compound the pain. Even worse, the IRS may seize your property or put a lien on it if your taxes continue to go unpaid.
Due to all the possible penalties, it is important to file your taxes now and pay what you can to mitigate any losses and the costs of back filing.
There are several documents that you will need in order to file your back taxes.
As previously mentioned, you will need form 1040 along with any applicable schedules and worksheets. You will need income statements such as Form W-2 or Form 1099 depending on whether you are classified as an employee or a contractor. Plus, you will need to know how much income you earned in the form of interest, dividends, and capital gains.
Additionally, you will need documents that support any deductions, exemptions, and credits that you claim. While not an exhaustive list, here are some of the other documents that you may need:
- Health care statement Form 1095-A, 1095-B, or 1095-C;
- Statement of IRA contributions;
- Mortgage statements;
- Student loan Form 1098-E;
- Medical bills;
- Statement of charitable contributions;
- Unreimbursed employee expenses, and;
- Casualty and theft losses.
If you need to file back taxes, you should plan to do so as soon as possible. Otherwise, the IRS may charge you with interest and penalties that can end up being very costly. The IRS can even confiscate your property or put a lien on it if your taxes remain unpaid for a long period of time.
There are several ways for you to file your back taxes. You can download the forms you need from the IRS website and file them yourself, you can hire a tax professional to do it for you, or take advantage of one of the online tax services. In any event, you should file your back taxes as soon as possible to minimize any interest and penalties that the IRS might assess.