Unfiled and back tax returns

Almost nobody sets out to stop filing. One year got complicated, or the money was not there to pay what the return would show, so it slid. The next April that year was still sitting there, so the new one slid too.

After three or four rounds of that it has grown into something you cannot look at directly, and the unopened letters make it worse every month. Meanwhile the IRS is not waiting. It already has your W-2s and your 1099s, because the people who paid you filed them. It knows what you were supposed to report. And when you do not file, it eventually files something for you, which is where this gets expensive.

What the IRS files for you is worse than what you would have filed

It is called a substitute return and it is built from the income reported about you and nothing else. No deductions beyond the minimum. No dependents. No business expenses against your 1099 income. Frequently the worst available filing status. If you sold stock, it can count the whole sale as gain because nobody told the IRS what you paid for it.

The bill that comes out of that is usually far above what you actually owe, and then penalties and interest run on the inflated number. This is one of the most common reasons a balance is enormous, and one of the most fixable.

You have more records than you think

People put this off because they think they need paperwork they threw out years ago. Mostly they do not.

Your wage and income transcripts from the IRS list every W-2, 1099, 1098 and K-1 filed under your Social Security number, year by year. That reconstructs the income side of most personal returns on its own. Bank and card statements cover much of the deduction side. For a business, the bank account is the ledger of last resort and it is usually enough to work from.

If you are not sure how many years you are missing, call me. I can find out from the IRS in a few days and you do not have to ask them yourself.

How I do it

1. Find out what is actually missing. You sign a Form 2848 and I pull your account and wage transcripts. That tells us which years are open, which ones the IRS already filed for you, and what it thinks you owe.
2. Work out how far back you have to go. Often fewer years than people assume. There is no point preparing returns nobody is asking for.
3. Reconstruct and prepare. Oldest first, so each year's carryovers land in the right place.
4. Replace the substitute returns. Where the IRS filed for you, our return replaces its number.
5. Deal with the balance. Once you are compliant every option opens up. See IRS tax resolution.

The refunds you may be losing right now

Not every unfiled year is a year you owe. People with withholding on a W-2 are often owed money for at least one of the years they skipped. There is a hard time limit on claiming a refund, and when it runs out the money belongs to the government permanently.

That is the reason I would rather you called this month than next year. Everything else here can be fixed later at a cost. A refund that expires is simply gone.

What it is actually like

People come in expecting a lecture. That is not what happens. I have seen this many times and there is nothing you are going to tell me that I have not heard. We work out what is missing, we file it, and we deal with what is left. Most people are surprised how much lighter they feel once the returns are simply gone from the pile.