Back in the System

So you haven’t filed a tax return for a while. In fact, it’s been several years. So many years that, frankly, the thought of filing them is overwhelming.

You ask yourself: How many years do I have to go back and where do I start-- 5 years, 10 years, 20 years?

The fact of the matter is that the Internal Revenue Service requires you to file, in most cases, the last 6 years of tax returns. This also includes making arrangements to pay all taxes, penalties and interest. The 6-year enforcement period for delinquent returns is found in IRS Policy Statement 5-133 and Internal Revenue Manual 1.2.14.1.18.

Why would the IRS be so merciful? To a large extent, the IRS does not have the manpower or infrastructure to easily process unfiled returns that go back 10 or 20 years. Believe it or not, the IRS is looking to be practical, so it draws a line in the sand that can be supported by its internal resources—and they have determined that this line be 6 years.

Filing the returns is actually the easy part; for most of us, the payments are what really hurt. However, the Service does provide several programs to help with this. These include installment payment programs, offer-in-compromise settlements and a program known as ‘currently no collectible.’ In some cases bankruptcy is an option, but make sure you see my blog dated 10/17/2014 and, of course, speak to an experienced bankruptcy attorney first.

If you are currently a non-filer, don’t continue to ignore the problem. Consider a fresh start by filing the last 6 years of returns and setting up a payment plan with the IRS. There is no need to continue to live in a state of fear and inaction. Taking the few steps to help you move on can actually be easier than you think.