How Many Years Back Do You Have to Go to File Unfiled Taxes?
Questions come up all the time in my IRS problem resolution practice regarding how far back my clients have to go to file their unfiled taxes.
My answer to it is that you will have to file the last six years tax returns in most cases. Unless of course you are owed refunds in those past years. In that case you will only be able to file your last threes years of unfiled taxes.
The IRS makes a big deal out of unfiled taxes because the tax system is based on voluntary reporting of income.
Internal revenue manual 4.12.1 states that in most cases, the IRS is only going to demand that the last six years of unfiled taxes be filed.
There are some exceptions to this rule.
One of those exceptions is if the IRS has prepared something called a Substitute for Return for you. Which is a return the IRS prepares under IRC code section 6020B. It allows them to file substitute returns in place of your unfiled taxes.
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If you owe over $25k in those Substitute for Returns you chances are they will send a revenue officer to speak with you.
If hit with this, you have the right to a process called Audit Reconsideration. Which would allow you to file the original return(s). In most cases this will reduce your tax penalties and interests.
For example, let’s say you have a 2009 SFR return and it’s now 2016. You’re going to want to go ahead and prepare an original return for that 2009 tax year in many many cases.
Another exception is if you’re going to file an Offer in Compromise. An Offer in Compromise is when the IRS agrees to accept less money than you owe them. If you’re filing one then you probably don’t need to file that return.
But if you are going to have to full pay the tax, then you are going to want to file the original return. Otherwise you’ll end up paying a lot more than you need to because of the extra interest and penalties.
Let’s push those exceptions aside though. In most cases involving unfiled taxes, you will only need to file for the previous six years.
If you have questions about this or anything else, I invite you to give me a call at 888-438-6474. My staff will be happy to set up a time for the two of us to chat.