Didn't do US taxes for 2 years. What now?
March 23, 2014 7:41 PM Subscribe
Every year, I've done my taxes myself, and on time. But, I didn't do my taxes last year. Or the previous year. The reasons are personal and ones that I would imagine the gov't may not care about - a breakup with my partner of 9 years one year + the crush of a big move and job transition the next. I knew there would be complicated tax things to sort through since I was living in corporate-funded temp housing (and also, each year I get $ back, but I think I would have actually owed this time around due to the temp housing deal). I let it build up into a huge scary tower of overwhelmingness. The months ticked by, and it was easier to push to the back of my mind. Essentially - I. just. didn't. do. them.
I would imagine that I could be fucked. But I'd like to take a deep breath, take this one on the chin, pay whatever horrible fines I may owe, and get it sorted this year. Pre-April 15th.
How fucked am I? Things I should know? Will I need to tell my job about this? I've never used an accountant before - tips for finding one? I'm in Portland, OR.
This was me a year ago. I owe what is, for me, a big sum of money. I'm making monthly payments to the IRS. They've been very friendly and accommodating. If you owe money when you file and it's more than you can pay at once, file then give them a call to work out a payment plan.
posted by zug at 7:54 PM on March 23, 2014 [4 favorites]
posted by zug at 7:54 PM on March 23, 2014 [4 favorites]
Do you still have your W-2s? If not, you may need to contact your employer, but you can just tell them that you lost them and your accountant wants to have them on file or some other BS reason.
posted by lunasol at 7:55 PM on March 23, 2014 [1 favorite]
posted by lunasol at 7:55 PM on March 23, 2014 [1 favorite]
You'll be fine. The IRS is actually one of the more reasonable creditors to work with, as long as you communicate with them. As a tax scofflaw, I've found them to be courteous and solutions-oriented. Failure-to-file fees were about $135, as I recall; and the interest/penalties on the amounts I owed weren't overly hideous.
If you need to set up a payment plan with them, that is super easy to do, and the minimum monthly payment is pretty dang low.
So, no, you're not fucked; and lots of folks are in your position (or MUCH worse), so there's no need to feel bad or ashamed.
posted by nacho fries at 7:55 PM on March 23, 2014 [5 favorites]
If you need to set up a payment plan with them, that is super easy to do, and the minimum monthly payment is pretty dang low.
So, no, you're not fucked; and lots of folks are in your position (or MUCH worse), so there's no need to feel bad or ashamed.
posted by nacho fries at 7:55 PM on March 23, 2014 [5 favorites]
Yes, you will be fine. Good advice above; you should file your taxes for each year you missed, then call their 800 number and explain the situation. The IRS's penalties and interest rates are not as scary as popular culture seems to have made them out to be.
posted by jeffamaphone at 8:13 PM on March 23, 2014
posted by jeffamaphone at 8:13 PM on March 23, 2014
Best answer: Former IRS Tax Examiner. This advice is my own, and not that of the Service.
The first thing you need to do is file returns for the tax years in question. Yours is not really that unusual of a situation. I saw many, many cases like it.
Once your return is processed, you're likely going to have to pay a Failure to File penalty, a Failure to Pay penalty, and interest on any tax due for the two tax years in question.
Any penalties and interest will be subtracted from any refund you are due. You may even still get a small refund. You might have a balance due that you will owe, I can't tell without your case in front of me.
Once your account is current, write a letter (I'm old) or call the IRS asking for abatement of the penalties associated with the 2011 tax year (or whatever the tax year of your first penalty is) on the grounds that it was the first time you were ever late in paying taxes. I'm 99% certain that interest can not be abated unless the interest was due to a ministerial act of the IRS, and there is none in this case.
If the penalties are abated, great! If not, IIRC you can appeal that decision, and you should do so. But I really think you could get at least the 2011 tax year's penalties abated. Something is better than nothing.
Me personally, I would abate the penalties in the first tax year, but I would not abate them in the subsequent tax year because you only get one bite of the apple.
You are not fucked, and you don't need to tell your job or anyone about this.
posted by Rob Rockets at 8:14 PM on March 23, 2014 [31 favorites]
The first thing you need to do is file returns for the tax years in question. Yours is not really that unusual of a situation. I saw many, many cases like it.
Once your return is processed, you're likely going to have to pay a Failure to File penalty, a Failure to Pay penalty, and interest on any tax due for the two tax years in question.
Any penalties and interest will be subtracted from any refund you are due. You may even still get a small refund. You might have a balance due that you will owe, I can't tell without your case in front of me.
Once your account is current, write a letter (I'm old) or call the IRS asking for abatement of the penalties associated with the 2011 tax year (or whatever the tax year of your first penalty is) on the grounds that it was the first time you were ever late in paying taxes. I'm 99% certain that interest can not be abated unless the interest was due to a ministerial act of the IRS, and there is none in this case.
If the penalties are abated, great! If not, IIRC you can appeal that decision, and you should do so. But I really think you could get at least the 2011 tax year's penalties abated. Something is better than nothing.
Me personally, I would abate the penalties in the first tax year, but I would not abate them in the subsequent tax year because you only get one bite of the apple.
You are not fucked, and you don't need to tell your job or anyone about this.
posted by Rob Rockets at 8:14 PM on March 23, 2014 [31 favorites]
I got right with them after a 12 year filing hiatus. Not the most fun, but it is doable. Rob Rockets has very good advice.
posted by scottymac at 8:37 PM on March 23, 2014 [1 favorite]
posted by scottymac at 8:37 PM on March 23, 2014 [1 favorite]
Back in the late 1990s, I went for two years without filing tax returns. I finally went to H&R Block, and they did the returns for me. I ended up getting substantial refunds for both federal and state (for both years), and I'm pretty sure I didn't even have to pay a penalty for filing late. Basically, nothing happened to me. And I never fell behind again after that.
posted by alex1965 at 8:58 PM on March 23, 2014 [1 favorite]
posted by alex1965 at 8:58 PM on March 23, 2014 [1 favorite]
Just one more voice to encourage you to relax, take a breath, and just file your returns. Don't stress or lose any sleep over this. If you end up owing, you can make payment arrangements. No one is going to come knocking on your door or harass you. The most you will get is a letter. The fines will probably not even be in the "horrible" range, unless you have a very low threshold of horrible.
I didn't file my returns for 3 years (marriage trauma, divorce and related issues). I finally started getting letters from the IRS (and my state). So, after numerous letters, I acted like a grownup and filed my returns. I ended up owing several thousand dollars including penalties, but paid it off through automated payments over several years. I could have also mailed payments or taken them to my local office in person.
Online services (TurboTax, etc) let you file past year returns. So... just set aside time, don't get overwhelmed, take a breath, and get it done.
posted by The Deej at 9:01 PM on March 23, 2014 [1 favorite]
I didn't file my returns for 3 years (marriage trauma, divorce and related issues). I finally started getting letters from the IRS (and my state). So, after numerous letters, I acted like a grownup and filed my returns. I ended up owing several thousand dollars including penalties, but paid it off through automated payments over several years. I could have also mailed payments or taken them to my local office in person.
Online services (TurboTax, etc) let you file past year returns. So... just set aside time, don't get overwhelmed, take a breath, and get it done.
posted by The Deej at 9:01 PM on March 23, 2014 [1 favorite]
I was in a similar situation up until last weekend, which I spent filing my 2011, 2012, and 2013 taxes. I also owed money for the first time in 2011 and had a more complicated situation than usual. Like you, I was pretty sure I owed money and also just didn't want to deal with it. But when I finally did them, it wasn't bad at all, and as a bonus I didn't owe nearly as much money as I thought I would.
I'm not sure how complicated your situation is, but if you decide to do it yourself instead of hiring an accountant, I recommend asking a good friend or family member help you. Having another person to help read the instructions, double check all the numbers, etc (plus moral support) made it much much better than it would have been otherwise.
I will still have to pay interest and penalties but just having sent the return in is a huge relief.
Also, I didn't bother to try to calculate my penalties and interest but I did read the documentation about it. Tax experts please correct me if I've gotten this wrong, but my understanding is that although interest will accumulate until you've paid it off, the "failure to file" fee is capped at 25% of the tax due, and the "failure to pay" fee is much smaller than that (also capped at 25% but it is only .5% per month so you won't have reached that yet by being two years late). That was one lesson that I learned (too late) - it's much much better to file on time even if you can't pay because the big fee is for not filing, not for not paying.
Also, even though I usually prefer to file online, I used hard copies this time, and it wasn't bad at all; t was actually a little easier I think because I could do a draft, check it over, put multiple pages in front of me at the same time, etc.
posted by treese at 10:23 PM on March 23, 2014 [2 favorites]
I'm not sure how complicated your situation is, but if you decide to do it yourself instead of hiring an accountant, I recommend asking a good friend or family member help you. Having another person to help read the instructions, double check all the numbers, etc (plus moral support) made it much much better than it would have been otherwise.
I will still have to pay interest and penalties but just having sent the return in is a huge relief.
Also, I didn't bother to try to calculate my penalties and interest but I did read the documentation about it. Tax experts please correct me if I've gotten this wrong, but my understanding is that although interest will accumulate until you've paid it off, the "failure to file" fee is capped at 25% of the tax due, and the "failure to pay" fee is much smaller than that (also capped at 25% but it is only .5% per month so you won't have reached that yet by being two years late). That was one lesson that I learned (too late) - it's much much better to file on time even if you can't pay because the big fee is for not filing, not for not paying.
Also, even though I usually prefer to file online, I used hard copies this time, and it wasn't bad at all; t was actually a little easier I think because I could do a draft, check it over, put multiple pages in front of me at the same time, etc.
posted by treese at 10:23 PM on March 23, 2014 [2 favorites]
Forgot to say, I'm not suggesting that you shouldn't hire an accountant (and seems like a good idea if your income situation was complicated and/or you just don't feel confident doing it yourself), but I don't see why you would need one just because you're filing late if you wouldn't otherwise. The calculations leading to the base tax amount are the same, it's just that you're going to owe interest and penalties on top of that.
posted by treese at 10:43 PM on March 23, 2014
posted by treese at 10:43 PM on March 23, 2014
You do not need to go to your employer with any of this. If you no longer have your W2s, 1099s, etc., the IRS can send you a print-out of all of them. You can just call them and ask for them to be sent. Or, if you want to use an accountant then you give that person permission to speak on your behalf and they call the IRS for the printout. Same with the tax forms themselves -- the IRS can send them to you along with the instruction booklet for each year you missed.
posted by Houstonian at 11:08 PM on March 23, 2014 [2 favorites]
posted by Houstonian at 11:08 PM on March 23, 2014 [2 favorites]
I'd gone five or six years not filing, was feeling those blues, a friend of mine told me "Hey, just file this year, do it correctly, no cutting any corners, just be a citizen. I did so. I made a deal with Life that if I didn't get hassled about any of it, I would not cash the income tax return check. I never heard a word from anyone about anything, I still have that check -- $250 -- a fairly decent sized chunk of change in 1984.
I've got three checks that've got good stories behind them, little pieces of paper that make me happy.
I'm not saying you ought do what I did, just saying that is what I did, and all was well. Chances are good that I didn't owe much, or anything, could even have had money coming back -- I did some work under the table, some as a regular employee.
Find an accountant who knows IRS jive, lay out your story, go from there. As others have noted upthread, no real problem, just something to take care of, like going to the dentist or whatever.
Good luck.
posted by dancestoblue at 1:02 AM on March 24, 2014
I've got three checks that've got good stories behind them, little pieces of paper that make me happy.
I'm not saying you ought do what I did, just saying that is what I did, and all was well. Chances are good that I didn't owe much, or anything, could even have had money coming back -- I did some work under the table, some as a regular employee.
Find an accountant who knows IRS jive, lay out your story, go from there. As others have noted upthread, no real problem, just something to take care of, like going to the dentist or whatever.
Good luck.
posted by dancestoblue at 1:02 AM on March 24, 2014
Given that you are freaking out, and that you appear to be in an income bracket that includes corporate housing, why not treat yourself to an accountant?
This is a thing that can be solved by gathering some documents and writing a check to a professional.
posted by Lesser Shrew at 8:16 AM on March 24, 2014 [1 favorite]
This is a thing that can be solved by gathering some documents and writing a check to a professional.
posted by Lesser Shrew at 8:16 AM on March 24, 2014 [1 favorite]
I forgot to file taxes back in 1996. In 2004-ish, I got a letter from the IRS about it, and I can't remember what it said, but it scared me enough that I hied myself downtown to the local IRS office and they did my taxes for me right then and there, with a smile. I think I even got a refund from it. And that was after 8 years. It was completely painless. Just do the taxes, or hire someone to do them, it will be fine. Really.
posted by rabbitrabbit at 9:32 AM on March 24, 2014
posted by rabbitrabbit at 9:32 AM on March 24, 2014
I forgot one year and ended up filing about 18 months later than I should have. Since I was due a small refund, there were no fees at all.
posted by soelo at 10:31 AM on March 24, 2014
posted by soelo at 10:31 AM on March 24, 2014
Yes, sorry if my comment about the fees was confusing. My understanding of it is:
There are no fees if you don't owe tax/are due a refund.
If you do owe tax, the fees would be 5% of the tax amount for each month you are late, capped at 25%, for failure to file, plus 0.5% of the tax amount for each month you are late, also capped at 25%, for failure to pay. So if you are two years late, the penalty would be 25% of the tax amount plus about 12% (24 months * 0.5% per month) for a total penalty of about 37%.
37% could be significant of course depending on how much the tax amount is, but it's not that scary or horrible I don't think. Before I did my taxes I had been imagining it would be much more (like double or triple the original amount owed or worse).
posted by treese at 1:07 PM on March 24, 2014
There are no fees if you don't owe tax/are due a refund.
If you do owe tax, the fees would be 5% of the tax amount for each month you are late, capped at 25%, for failure to file, plus 0.5% of the tax amount for each month you are late, also capped at 25%, for failure to pay. So if you are two years late, the penalty would be 25% of the tax amount plus about 12% (24 months * 0.5% per month) for a total penalty of about 37%.
37% could be significant of course depending on how much the tax amount is, but it's not that scary or horrible I don't think. Before I did my taxes I had been imagining it would be much more (like double or triple the original amount owed or worse).
posted by treese at 1:07 PM on March 24, 2014
Will I need to tell my job about this?
Your tax return is not your employer's business unless they need to garnish your wages or you need some old records from them. No, don't tell them.
I've never used an accountant before - tips for finding one?
Ask friends and family if they use an independent tax preparer that they would recommend to you. If they are swamped with current year returns, you may need to wait until after April 15th.
If you do have to wait, file this year's taxes yourself and worry about the older years after April 15th. If you have a refund due to you this year, it may be held until you file for all previous years. If it is not held, don't spend it until you know what else you owe. The first time I filed after forgetting, my refund went through but they found the skipped year the next time I filed.
posted by soelo at 2:48 PM on March 24, 2014 [1 favorite]
Your tax return is not your employer's business unless they need to garnish your wages or you need some old records from them. No, don't tell them.
I've never used an accountant before - tips for finding one?
Ask friends and family if they use an independent tax preparer that they would recommend to you. If they are swamped with current year returns, you may need to wait until after April 15th.
If you do have to wait, file this year's taxes yourself and worry about the older years after April 15th. If you have a refund due to you this year, it may be held until you file for all previous years. If it is not held, don't spend it until you know what else you owe. The first time I filed after forgetting, my refund went through but they found the skipped year the next time I filed.
posted by soelo at 2:48 PM on March 24, 2014 [1 favorite]
Response by poster: Many, many thanks for the sound, practical advice (from an expert, even) and for the psychological reassurances. I really needed both. Used Thumbtack to put out a quick request for bids from local tax professionals and just heard back with my first bid (200 bones for all three). Not sure if that's high, low, or in between, but I will see what else comes my way and go from there. I already feel a thousand times lighter. Thank you, MeFites.
posted by red_rabbit at 8:48 PM on March 25, 2014 [1 favorite]
posted by red_rabbit at 8:48 PM on March 25, 2014 [1 favorite]
This thread is closed to new comments.
posted by theora55 at 7:46 PM on March 23, 2014 [17 favorites]