Here is what to do when you have 20 or more years of unfiled tax returns. Not all tax returns are always required. This is not legal advice, but a general rundown of how you handle the situation with the IRS and states. States vary in their handling of unfiled tax returns.
First what NOT to do on more than 20 or more years of unfiled tax returns
Do not go to a CPA/EA and just file all the unfiled tax years. You might be filing things that do not need to be filed. The IRS and state might have already come up with a lower balance for you. There might be a lot of debts that already have expired, especially with the IRS. CA and NY will probably still be there and may have come up with large balances.
See what they have filed for you, if anything
Ask about “140 codes” on any unfiled years and ask if they are “still looking for it?” The IRS is probably not looking for anything that is older than 10 years. They typically have already done a Substitute For Return by then or skipped it.
Sometimes the IRS skips old years or does a year for you with a lower balance and you are lucky. Filing returns that are required is often the best option. Tax debts do have expiration dates.
Order Wage and Income information for each unfiled year that needs to be filed. You can also order an Account Transcript if there are any payments you made that were not withheld from an employer.
State tax returns not filed for more than 20 years
Often they go back many years, longer than the IRS. IRS and states will usually come up with much higher balances than you really would owe. CA will use professional licenses to just “come up” with a balance. CA and NY are the best at collecting on people that have left the state. States often get to preparing Substitute For Returns faster than the IRS. Statute of limitations are higher in many states.
Example: They sent me a letter for $9,000 when I moved to Las Vegas, Nevada, but I have a professional license in California. They assumed a debt based on the professional license.
Examples: NY and CA are both 20 years and there are some things that can extend it just like the IRS
Get wage and income information from the state. Find out how much tax was withheld and paid. Some states do not have this data and you can request a copy of your W2 from your old employer. File what needs to be filed and proceed on resolving the debt. Some states, like California, will not even review an Offer In Compromise until all missing years are filed.
Easy way to deal with unfiled tax returns
We order the information, check it all out, file what needs to be filed, and proceed on the best resolution. If we cannot help you we’ll tell you. No false promises for settlements, just real results!
This post does not constitute legal advice. Consult with a tax attorney!