Legacy Law Blog

If you've missed filing federal tax returns for multiple years, you don’t need Doc Brown’s time machine from the 80s movie trilogy "Back to the Future" to set things right. But now is the time to take action, not sit back hoping the situation will resolve itself.

Many taxpayers think that the fact that they have yet to hear from the IRS means that they don’t need to file the missing returns. This simply isn’t true. The IRS can and will begin enforcement actions for unfiled returns regardless of whether they have done so in the past. In this way, unfiled returns are like a ticking time bomb that can go off at any time and often do so when you least expect it.

By addressing missing tax returns now, you can take back control of your future and address these issues on your time. Here’s what you need to know, what to expect, and why it’s critical to tackle your tax issues directly.

Steps to Take Right Now

If you discover that there are multiple missing tax returns for you, your business or both, take a deep breath. While the thought of multiple years of tax returns and the possible impact of future tax and penalties imposed by the IRS can feel as daunting as a run-in at your corner diner with Biff Tannen, you can take these important steps today to fight back.

• Organize Your Records: Gather as much financial paperwork as possible—W-2s, 1099s, bank statements, prior tax returns and other income documents. If you’re missing anything, you can request IRS wage and income transcripts to fill in the gaps.
• Contact the IRS or a Tax Professional: Consider consulting an experienced tax professional and a Certified Public Accountant (CPA). They will help you with the document gathering process by identifying documents you will need to prepare to file the missing returns. They will help you navigate the preparation and filing process, ensure your returns are accurate, and they can negotiate with the IRS on your behalf.
• File Back Tax Returns: The IRS typically requires six years of back returns to be filed for individuals who are behind, but every case is unique. File as many years as possible as soon as possible—the sooner you start, the better your options become.
• Address Any Tax Debt: If you owe money you can’t pay in full, ask about payment plans or Offers in Compromise that may reduce the amount you ultimately pay. It is important to know that the IRS will work with you to allow you to start paying down your balance without ruining you financially.

What to Expect from the IRS

As the missing returns are processed, you can expect certain things in response from the IRS. These responses are very normal where there are multiple years of missing tax returns.

• Penalties and Interest: Expect the IRS to charge failure-to-file and failure-to-pay penalties, plus interest on unpaid taxes. These penalties are unavoidable because the statutory deadline to file the returns has already passed.
• Possible Enforcement Actions: The IRS can garnish wages, levy bank accounts or place liens on property. By proactively submitting the missing returns and working to resolve the tax balances, you can usually avoid the harshest outcomes.
• Limited Refund Windows: The IRS only allows three years from the original filing deadline to claim refunds. Once this three-year window closes, there is no way to extend it to allow the IRS to send the refund for the year. This means that for older refunds, the money is forfeited—even if you file now.
• No Statute of Limitations Until You File: The clock on IRS enforcement and collections doesn’t start until you submit your missing returns. In other words, the IRS can collect any balance for a year with a missing return for 10 years from the date that you file it. This is the main reason why it is always a best practice to file a missing return as soon as possible.

Don’t Delay Any Longer

Addressing your missing tax returns and any resulting balances can lead to many long-term benefits. While the process of preparing the returns and filing them is stressful, it will lead to the following:

• Peace of Mind: The anxiety of having years of unfiled returns can weigh heavily. Taking action puts you back in control of your life, leading to better sleep and less stress.
• Protect Your Finances and Credit: The longer you wait, the more you risk IRS collections, wage garnishments or property liens that can severely damage your financial future. These outcomes will very likely spring up when you least expect them and when can least afford to address them.
• Restore Eligibility for Loans and Aid: Many loans, mortgages and other forms of financial assistance (including FAFSA for students) require proof you’re compliant with tax filings. Most lenders will want to see that you’ve taken steps to address any outstanding tax balances and have either paid the balance in full or are actively on a payment plan.
• Reduce Penalties and Interest: You can’t avoid all penalties, but acting quickly can help you limit the additional charges that pile up each month. Remember: these penalties are already present for the missing tax years and can be assessed against you whether you file the return or not.
• Preserve Your Rights: Once you file, you regain the right to dispute any IRS findings, appeal decisions, as well as to access payment or settlement options. You can also claim any missing refunds due to you if you act within the three year window.

Ignoring years of unfiled tax returns is never a solution. The IRS has become more efficient at tracking down non-filers, and the costs of delay—both financial and emotional—only increase over time. By taking deliberate steps to resolve your tax issues now, you can regain compliance, limit penalties and move forward with confidence.

Reach out to a trustworthy tax professional if you’re overwhelmed. Help is available, and it’s never too late to get back on track with your annual tax filing, especially if you don’t know a scientific genius who owns a DeLorean!