It’s Been A Few Years Since I Filed A Tax Return. Should I Start Filing Again?
Every year, millions of people ask themselves these questions.
- “If I missed filing a tax return, am I better off just not filing ever again? Maybe the IRS won’t notice.”
- “What will happen if I start filing again?”
- “Why should I file again? Is the problem just getting worse while I ignore it?”
Let’s break down the reality of the situation when you have unfiled back tax returns – and exactly what to do about it.
Three consequences of unfiled returns
When evaluating the costs of not filing your return, know these facts:
1. It’s illegal.
The law requires you to file every year that you have a filing requirement. The government can hit you with civil and even criminal penalties for failing to file your return.
2. Prepare to pay extra if you owe taxes.
The penalty for filing late is 5% of the taxes you owe per month for the first five months – up to 25% of your tax bill. The IRS will also charge you interest until you pay off the balance.
3. You can lose your refund.
If you were supposed to get a refund with the late return, you could lose the refund depending on how late you file. To get your refund, you have to file the return within three years of the due date.
Good news: There’s no penalty on a return with a refund (or zero tax balance), so don’t delay if you want that refund!
What to expect when you start filing again
Remember, the law says you must file all required tax returns. If you haven’t met that obligation, you should get back into good standing with the IRS. Learn how to file back tax returns with the IRS.
Here’s more about what happens when you file back tax returns.
You could be audited – not because your return is late, but because the IRS thinks the return has errors
The IRS will evaluate any back tax return you file in basically the same way it evaluates all returns.
The average return won’t dramatically increase your audit chances, especially if you earn Form W-2 wages and don’t have a complicated tax situation. In some cases, though, the IRS could select a back tax return for audit.
For example, let’s say you haven’t filed for three or four years and you suddenly file a return with several hundred thousand dollars of self-employment income. This would raise red flags for the IRS compared to other years – and the IRS would likely open an audit.
Your chances of being audited go up even higher if you file the return, but leave off income that has been reported to the IRS, such as Form W-2 or 1099 income. That makes it even more important to thoroughly and completely prepare back tax returns.
For most people, the further back in time you go, the less reliable your records are. If this is the case for you, don’t worry. There’s something you can do about it. You or an authorized tax professional acting on your behalf can research your account at the IRS. Your IRS transcripts will help you uncover and report all the income that’s been reported to the IRS.
In the unlikely event that the IRS selects your return for audit, the IRS auditor will require you to file all your back tax returns. Those returns will almost certainly be included in the audit.
You’ll get your refund if there aren’t any issues
If you file your back tax return within three years of the return due date, the IRS will generally send your refund if you’re supposed to get one.
That’s assuming there’s no cause for the IRS to hold or take your refund.
If the IRS has already started a delinquent return investigation or inquiry on one or more of those years, the IRS will hold your current-year refund until you file the back tax returns or the IRS finishes its investigation. Delinquent return investigations can end with the IRS filing a return for you. (This is not a good thing.)
If you have issues like this, the IRS can freeze your refund or apply your current-year refund to any tax bill you owe – just like the IRS would for any taxpayer who owed back taxes.
If you owe and can’t pay, the IRS will work with you
If you file a return and owe taxes, it’s always best to pay by the due date of the return to minimize penalties and avoid interest.
But in some cases, that’s just not possible.
If you haven’t filed all your required returns, you won’t have many options until you file them all. Delaying or not filing at all is a bad strategy. The IRS charges (or, “assesses”) a steep penalty for filing late. Add that to the penalty for paying late, and you’re adding as much as 25% to your tax bill.
But if you file the returns and get into a payment agreement with the IRS (like a monthly payment plan or other arrangement), you’ll get reduced penalties. You may even qualify for certain forms of penalty abatement.
The bottom line: It’s best to address tax problems sooner rather than later. Learn about unfiled tax returns.
Check out H&R Block Tax Audit & Notice Services to find a local tax professional who can navigate the IRS for you. Your tax pro can prepare and file accurate back tax returns, set up a payment agreement with the IRS for you, and resolve any other issues related to your late returns. Or get help from a trusted IRS expert.
Get help from an IRS expert
H&R Block’s experts can solve any IRS problem, no matter how complex.
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Requesting your tax transcripts is the best way to research your IRS tax account. You can also authorize your tax pro to communicate with the IRS for you.