She Didn't Pay Taxes
I haven't filed any tax returns for about five years, mostly out of sheer laziness and the overwhelming task of dealing with all that paper and figuring medical, charitable and mileage deductions, etc. I usually get a refund so that is not the issue at all. The IRS put me on backup withholding, but that's it. I don't even know if I have all the records for past years. How do I get started filing taxes again?
Get It Done Now!
I'm an Enrolled Agent (licensed by US Treasury to practice before the IRS). Thus, I'm a professional tax accountant/preparer. Run to one near you. You may also check www.NAEA.org for EAs in your area. When you fail to file a return, the IRS makes one up for you from documents it receives, such as your W-2, 1099-R, other 1099s, etc. Other than mortgage insurance, it takes no deductions against that income so your balance due on this substitute tax return is substantially higher than it should be.
You donated to Uncle Sam and it's not deductible. If you went in today, you could file returns for the five years. However, you won't receive refunds for all of them. You'll only receive your current refund plus three (the other(s) are lost to you). If you don't do this, you face a time when there's a balance due on your substitute return and the IRS comes after you. Then you have a fresh can of worms. Get it done now, before they intervene. Some records may be missing, but a tax pro can put things together. Find out what the IRS may have received that you've misplaced and get this out of the way.
Another Plug for Enrolled Agents
The topic of people who haven't filed tax returns for many years was featured in today's Washington Post "The Color of Money" column. The columnist advises taxpayers to contact an Enrolled Agent, who is someone certified by the U.S. government to represent and help people with tax-related issues. The website has a lot of good information on it, including how to find an enrolled agent in your area. Visit www.naea.org.
Find a Good Tax Attorney
I went through this several years ago, and I want to stress that you shouldn't ignore this any longer! I ended up with major garnishments from both federal and state. I consulted a tax attorney, who was quite expensive. He was able to get the garnishments stopped. He told me to file the current taxes immediately, get the back ones filed as soon as possible, and do not get behind again.
You can get copies of old W-2 forms by contacting your employers for those years. If you do not have the medical receipts and so on, you will just have to take the standard deduction. I did owe money because I also no longer had some of the records. Also, there is a fine for not filing or for filing late, and interest is added. My attorney was also able to negotiate away some of the interest. For about eight years, I did not receive my refund checks back. They were held and applied toward what I owed. Eventually, the back taxes were paid off.
I called my local Bar Association (listed under State Government) and asked for a referral to a tax attorney. Here in Oregon, if the Bar Association refers you to an attorney, you get a very low rate on the first hour or half-hour. My first appointment cost about $20, but that was about 15 years ago. It may be more now. The attorney's charge was $120 per hour, and he did give me part of the time as pro bono. It doesn't hurt to ask. I would not have needed as much of his time if I had taken the initiative before it got to the point of garnishments.
File for Last Three Years
File the last three years. If you are due a refund, statute is barred after three years. You can claim refunds (or pay taxes) for 2005, 2004, and 2003. I am a CPA in Texas and have done this work for clients. Tax forms should be available to copy at the library with the tax schedules.
Start Now and Work a Little at a Time
If you need help, call the IRS VITA site at 1-800-829-1040. They can connect you with volunteer tax preparers if you meet income (under $38,000) or age (over 60) guidelines or if you're in the military. Even if you don't qualify for the free tax preparation, the local coordinator should have phone numbers of volunteer tax attorneys who will advise you and present your case, if it comes to that. Especially if you have kids and any earned income, this could be a real bonanza.
I was one of the volunteer tax preparers last year and our office got about $70,000 refunded to people. The average was $300, but some refunds were a lot bigger (and, of course, some people owed). There are tax credits that are designed to put money in the hands of working parents, so try and get an appointment and see if you qualify.
If doing your taxes is a skill you have and it really is just laziness on your part, call the same IRS number and get the forms for the missing years, and then just work on it a little bit each day. Just set a timer for 15 minutes and dig through places you've put the papers. Set the timer to sort the papers, and set the timer to fill out your name and social security number for each set of forms, etc. (You bet I'm a FlyBaby!). It's already been five years, so a couple more months isn't that big of a deal if you really don't owe anything. You could well be one of the people to whom the IRS owes part of that $2 billion. They'll only give you a refund if it's from the last three years, so you may want to focus on the most recent and work back.
You're Not Alone
As a five-year tax preparer for H&R Block, I saw many clients that for some reason or other haven't filed taxes. We have the capability of preparing tax returns for the past three years with the software that is loaded on our computers.
Many times, the clients have moved or lost their W-2s and other tax information. The IRS has records of the earnings for a particular tax year and the federal withholding for those earnings. They do not have the state withholding tax information.
If a client doesn't have enough medical, state withholding, real estate and personal property tax, mortgage interest, charitable contributions and unreimbursed employee expenses to itemize, then the client is better off taking the standard deduction amount for each year as determined by the IRS. If a client has a tax refund coming for the 2005 tax return, we can deduct the tax prep charges from the federal refund as well as the prep fees for 2004, 2003 and 2002 if there is a large enough refund to cover all those years. The 2005 return can be filed electronically, but the earlier years have to be mailed.
Enlist the Help of the IRS
We, too, delayed on a couple of years' worth of taxes. It was a big mess and waiting made the mess bigger. So, don't wait any longer. Fix this now, and then don't do it again. Get yourself together using a good time, paper, and life management system.
This came as a shock to us, but the IRS can and really wants to be your friend. They just want you to do the right thing. They'd prefer you do it at the right time, but even though you haven't, it's not too late and they'll help you.
Grab your phone and call 1-800-829-1040 for individual tax questions or 1-800-829-4933 for business tax questions. Or go to IRS.gov and click "Contact IRS" up at the very top and then click on "Contact My Local Office." If you happen to talk to someone who is having a bad day, thank the person politely, hang up, and call back. I promise you that 99.99% of the folks we dealt with on our short journey were wonderful, knowledgeable, helpful, and abundantly willing to work with us.
Next, get some help, but know what the helper is doing with those figures. We used H&R Block. However, this is not an agency I'd recommend. I would recommend asking the IRS for help in sorting it out. Their local offices will often prepare your tax returns for you, but be savvy with regards to what deductions you may have coming. They may not be as eager as a commercial preparer is to get you a big refund. I'm not sure how much (if anything) they charge for this service, but it would certainly be less than dumping it all on a commercial preparer.
Finally, expect it to take some time. Discuss this with the IRS, and set a plan for yourself on paper. Don't procrastinate any longer. If the IRS gives you 90 days to sort it out, don't start looking through all of your files you've got stashed in assorted boxes in your storage building on the 85th day.
Take the Next Step
- 8 steps to take if you can't pay your taxes.
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