Here’s a question I recently received at USTaxAid.com. It’s just one question, but I get it frequently. During the recession, a lot of people simply stopped filing their tax returns. The economy came back and now they’re in a pickle. They need to file because they have income and they know that the IRS and state authorities are going to be on them soon. But if they file now, it will highlight all of their past due returns.
Here’s the question I received:
Please bear with me, I have two business which I’ve not filed taxes. I need to the last 2 year taxes for my personal and the business. I will like to know the best way to go about filling them, thus saving myself some money. I appreciate your assistance.
And my response:
It’s critical to get caught up as soon as possible. If it has been a lot of years, start with the past 6 years. That is often all that is required to get in the IRS and state good graces. However, they may ask for all of the past due returns or hit you with an assumed income that is much higher than what it actually should be.
If you file late before they find you, you are in much better shape than if they find you and force you to file.
So, right now, file. Get them done ASAP. Generally, it’s best to file all of the returns together. As soon as you file a late return, you’ll alert the authorities to look for other returns. They will come asking if you don’t have those filed as well.
You aren’t going to save yourself any money on prep fees. I once had a man who was past due 6 years and wanted a fee reduction to file them. I told him not only was there no fee reduction, but there was actually a surcharge. We had to load up old programs, verify what the tax law was in effect for those years and strategies timing on various issues. Plus, we’re almost always doing that with incomplete and sketchy records.
It’s much harder to do the work years later. In that case, we didn’t have a meeting of the minds. Time went on. He couldn’t find anyone to file his returns for a reduced fee and so he didn’t file.
Last I heard, the IRS had caught wind of his non-filing and seized all his assets. He’s near homeless now with no business and divorced to boot.
File your taxes. Get it done quickly and get them all done together. It will be painful. The best way through a bad time is THROUGH it. Just get it done.