File even if you can't pay
The single biggest mistake people make is not filing because they're afraid of the balance. That's backwards. The failure-to-file penalty is far harsher than the failure-to-pay penalty. One accrues at roughly five times the rate of the other, month for month.
Filing and paying are two separate problems. Filing stops the worst penalties from piling up and starts the clock on important deadlines. Paying can be handled afterward through a payment plan or other arrangements. So file first. We'll deal with the money second.
You probably only need the last six years
People assume they have to dig up 15 or 20 years of records. Usually not. Under longstanding IRS policy (Policy Statement 5-133, in the Internal Revenue Manual), filing the last six years of returns is generally enough to be considered in compliance for enforcement purposes.
That's the general rule, not an absolute guarantee. The IRS can ask for more years if there's a specific reason, like large income, a business, or an open investigation. But for most folks, six years is the target, and knowing that alone takes a lot of the panic out of it.
Beware the Substitute for Return (SFR)
If you don't file, the IRS can eventually file for you. It's called a Substitute for Return, and it is not your friend. The IRS builds it from the income data reported to them, and it gives you no deductions, no exemptions, no dependents, and the worst filing status.
The result is an inflated bill, often far more than you'd actually owe on a properly prepared return. Here's the good news: even after the IRS files an SFR, you can usually still file your own real return to correct it and lower the number. But it's a lot easier, and cheaper, to file before they do.
Reconstruct your records with IRS transcripts
Lost your W-2s and 1099s? No problem. The IRS keeps wage-and-income transcripts showing most of what was reported under your Social Security number, and you can pull them for the years in question. They're the backbone of reconstructing an accurate return.
One deadline matters here. If a return is filed more than about three years late, any refund you had coming is forfeited. The government keeps it. So if some of those old years actually had refunds, filing sooner can mean the difference between getting that money and losing it for good.
Get compliant first, then deal with the balance
The path is simple in order, even when it's not easy: get the returns filed and become compliant, then address whatever you owe. You can't negotiate with the IRS on a balance until you're caught up on filing. Compliance is the ticket in the door.
Once you're filed, the balance has options. An installment agreement (payment plan), an Offer in Compromise to settle for less than the full amount if you qualify, or Currently Not Collectible status if you genuinely can't pay right now. Which one fits depends entirely on your numbers.
This is general information, not legal advice, and every case is different. But the principle holds across all of them: voluntarily coming forward before the IRS acts almost always puts you in a stronger position than waiting to be found.