You want to do the right thing and file the IRS returns for the past few years. But you’re frozen with indecision because you’ve lost W-2 forms and 1099s.
Failure to File IRS Returns is a Problem (and a crime)
Yes, the failure to file tax returns is a Federal crime, but if you do it the right way, you can reduce your stress level and be more productive.
In fact, this situation is quite common as approximately one million Americans each year fail to file their necessary tax returns with the IRS.
If it’s been a few years, then it’s actually likely that you’ve misplaced or lost your tax records. You may have moved, or gone through a divorce, or perhaps a fire or flood.
Fixing your Records Problem
Here’s the key: the IRS actually retains records of all of your W2s and 1099s. Whenever an employer issues a W-2 or a bank issues a Form 1099, then they are required to submit those forms to the IRS, and generally those records will be available for 6 years.
You can contact the IRS to obtain your Wage and Income Transcripts, or you can do an IRS Freedom of Information Act request to obtain all records associated to the years in questions.
A Case Study
Our office prepares a lot of delinquent IRS tax returns. We got a call from a new client named Rich who said that he hadn’t filed returns in “quite a few years”. He wasn’t sure exactly how many. So, we said we would call the IRS to find out exactly how many years had not been filed.
The next day, we called the IRS (yes, it takes a while, but we finally got someone on the line), and they said that he had not filed from 2010 to 2016. As a general rule, the IRS focuses on the past 6 years of unfiled returns. In fact, we were able to convince the IRS not to even require him to file the 2010 return.
We also made two other requests to the IRS. First, we asked for a 30 day “collections hold” in Rich’s case. This meant that they would not issue tax liens or tax levies during this month-long period. The IRS agent on the phone agreed to our request.
Second, we asked for that agent to fax our office all of Rich’s income records for 2011 through 2016, and indeed, they did so that very day.
We started to prepare Rich’s returns the same day, and met with him later that week in order for him to review them so that they could be filed.
A Final Note (Ability to Pay the Tax Debts)
As a general rule, the IRS can be persuaded to enter into payment plans (Installment Agreements) for many taxpayers. In Rich’s case, he was a senior citizen on a fixed income. Because for all 6 years, he had been under-withholding on his pension and Social Security, he wound up owing approximately $20,000 to the IRS. We obtained his monthly income and expense information and got Rich into the “Currently Not Collectible” Program. We’ve written about the CNC program elsewhere, but in a nutshell, the IRS will not seek any payments from Rich for approximately 18 months, whereupon they will review his income and expense information again to see if his situation is the same, or has change.
The bottom line is that if you’ve got unfilled returns and are worrying about not having the ability to pay, then there may be programs or payment plans to suit your needs.
Call our office at 412-920-6565 if you have questions about unfilled tax returns.