What You Need to Know About Filing Past Tax Returns

When you do not file a tax return, the Internal Revenue Service, or IRS, actually creates a substitute return for you to assess your tax liability.  The substitute return will be based on any information that the IRS may have received such as W2’s filed by your employer.  Once this tax assessment is created, the IRS can and will begin the collection process to collect those taxes.  The only way to resolve the tax liability and cease the collection process is to file the past tax returns.

Your first order of business when filing past returns is to gather up any and all financial documents that you may have for the tax return that you need to file.  This should include all income statements including W2s for earnings and wages and 1099’s for any miscellaneous income that you may have generated from contract work.  If you inherited money, received a gift, or won money, you must also report those incomes.  If you are unable to locate these documents, you might try contacting your employer, contractor, etc. to see if they can provide you with copies.  If this is not possible, you may request an income date report directly from the IRS.  It may be a good idea to request this even if you do have the supporting documents as it will tell you the minimum income that the IRS has a record of.

Next, you will need to review all of your eligible deductible expenses, claims, and allowances for the tax period.  The IRS will not likely have any of these deductions reflected on the substitute return that they created, and this is important in reducing the amount that you owe.  If you are eligible for the deductions, then the IRS will likely correct the return and adjust the assessment accordingly.  An accountant or lawyer that specializes in filing past tax returns may be able to provide additional advice about how to record and report deductions when you do not have the supporting documentation.

When filing past tax returns, the key is to complete your returns as thoroughly as possible with the information that you have.  Once the past tax returns are filed and the IRS has finalized its assessment, you will be better prepared to negotiate a settlement to resolve the tax liability and return to good standing with the IRS.