Essentials of Back Tax Filing

Filing back taxes means you are filing late or unpaid tax returns to the IRS. For whatever reason — financial, confusion or simply a clerical error — not getting a tax return filed can trigger fees and interest. One way to reduce or avoid these penalties and stop IRS legal action is by filing back taxes. At Dimov CPA, we can help you file your back taxes and get you stable again.

What Is Back Tax Filing?

Filing back taxes means filing a return for previous years in which it may have been missed. Filing taxes is important to avoid penalties, interest, and even enforced collection action like wage garnishments or bank levies. By filing back taxes, you can reduce penalties and interest associated with the unfiled returns, and prevent severe IRS actions.

Reasons to File Back Taxes

Avoid Penalties and Interest: The IRS assesses penalties and interest on taxes that are not paid. You may also be able to lower these charges if you file some back taxes.
Tax Refunds: You might qualify for unpaid years, though remember that you are able to claim a refund only if you file within the three-year deadline. Any refund is lost after three years.
Get Loans / Financial Aid: Many lenders require evidence of tax compliance in order to be eligible for a mortgage or student loan.
Helps You Avoid Collection Actions: By filing your back taxes, you may be able to avoid IRS collection actions like liens or garnishments.

How long does back tax filing take?

From the time of filing to resolution, back tax return filings typically take 6-8 weeks depending on how long it takes to gather records and IRS processing times.

Document Collection: This can last a few days to a couple of weeks, depending on your records and if you need IRS help.
Filing During IRS Filing: Processing times are different but filing electronically accelerates the process.
Response Time: The IRS will need time to review and process back tax filings, expect anywhere from 6 to 8 weeks for a response (these timelines can pop up during tax season)

Common Mistakes You Should Avoid When Filing Back Taxes

Mistake	Description
Incorrect Information	Mistakes in providing personal or financial information will trigger delays, penalties, or audits; therefore, never give incorrect information.
Neglecting Deductions/Credits	Failing to take advantage of deductions or credits can mean paying more tax than required.
Failing to Seek Professional	Trying to file back taxes without professional support can result in mistakes, lost opportunities or audits
Missing Deadlines	When you delay in filing back tax you will be charged more penalties and interest that increases your amount of overdue.
Failure to Respond to IRS Notices	The IRS is notorious for taking more aggressive measures if you fail to respond when they contact you about a delinquency.

Impact If You Do Not File Your Taxes

Interest and penalties: The longer you postpone, the higher the interest and penalties grow.
No Refunds Lost: The IRS will take away your refunds, if returns are not filed in 3 years.
IRS Enforcement Actions: The IRS can start taking money from your paycheck, levy your bank accounts, or place a lien on your property.
Problems with Loans: If you want to receive loans or some help from the government in one form, you cannot do so with unfiled taxes.

How Much Are Penalties for Filing Back Taxes?

Back taxes may incur penalties such as an incremental 5% monthly penalty for late filing, a separate 0.5% monthly penalty for late payment of taxes owed, and daily interest on the tax amount owed but unpaid to the IRS.

Failure to file penalty: 5% of unpaid taxes for each late month, to a maximum of 25%.
Late Payment Penalty — equal to 0.5% of unpaid taxes (for every month the tax is unpaid).
Interest on Tax Not Paid: Charged daily at the IRS’s annual rate that is subject to quarterly adjustment.

Conclusion

Filing back taxes can feel daunting, but we at Dimov CPA specialize in restoring order to your financial life. We have been in this industry for decades helping clients when it comes to filing back taxes without the penalties. Give us a call today for an appointment. Get started with compliance planning!

FAQs

1. How many years back can I file taxes?

Generally, you can file back taxes up to six years in order to be compliant — the IRS might ask for more years in some circumstances though.

2. Will the IRS negotiate my tax debt?

Yup, you can get an Offer in Compromise and pay less than the tax that you are due to escape a debt.

3. Will filing back taxes trigger an audit?

Yes, filing back taxes can raise a flag with the IRS, yet rest assured that correct filings can also alleviate your audit risk. We have you covered at Dimov CPA with your filings, making sure they are completed accurately.

4. What do I need to do to prepare for back taxes?

When preparing to file back taxes, you will look for income documents like W-2s or 1099s, and any record of deduction or credit from the years you missed.

5. How can I tell if I owe taxes from previous years?

To check your tax status, you should either directly contact the IRS, or create an online account on the IRS website in order to see your respective records.

6. Will I retain a refund if I file back taxes?

To claim a refund, you should file within three years of the original due date. You lose your refund after three years.

Essentials of Back Tax Filing