Catching Up Back Year Returns

This time of the year, I seem to do quite a few back year returns. Sometimes the client has miss only one year, other times it's a lot of years. Sometimes the IRS or state revenue office is providing the motivation, sometimes not. No matter why the taxpayer wants to catch up the basic process is the same.

First, I need to have information on their income and expenses. For most, I'll need the W-2, 1099s and other tax info they would normally provide their preparer. If the client hasn't kept that info, either they or I will have to get wage and income transcripts from the IRS. If I do it, I'll need a signed form 2848, Power of Attorney. And the client will have to figure their deduction amounts for their Schedule A and income and expenses for their businesses from their records. All the IRS will have on file are the 1099s and 1098s. And I really want to see the last return they filed. This is especially true if I'm preparing more than a year or two returns. And it's also the last thing most clients will have and the more returns I have to do, the less likely they will have the return. Whoever is preparing the return, myself or the taxpayer, should want to start with the oldest return. Too often there is info that needs to carry forward to the next year.

With the exception of the 2011 tax return, all returns will have to be mailed. Past year federal returns can't be e-filed. And if the taxpayer qualifies for a refund, they may not get the money if they have waited too long. You have 3 years from the due date of the return to file the return. If you miss that date, you still need to file the return but you won't get your refund. (Only refunds for tax year 2009 and later will get refunded or credited.) But if you had a balance due, you will still owe that plus interest and penalties.

Don't assume that if you haven't heard from the IRS or state that you don't need to file return. There are some people who actually don't have to file but most of us do. Remember, the IRS has a matching program and you may not have received a letter because they estimated a refund. But if you want to do an installment agreement or Offer in Compromise, you will need to get all outstanding returns filed even those with refunds.

So if you're behind in filing your income taxes, summer is a good time to catch up. After all, it's too hot outside.

Comments

[Will]

How do you file state taxes with a IRS transcript form, as it does not contain any information given to the state? Does the state provide the same form?

[Trish]

It depends on the state. Best idea is to check with the state and see if they have the info and if not, find out what they suggest.