I haven't filed a return to the IRS in 10 years

Question

My employers have always withheld taxes and for the most part I've assumed they've done it right. I have probably owed a bit some years and been owed a refund some years.

Anyhow, I want to get straight with the IRS. I'm afraid to just start filing though... and I have no idea what to do about all of the years I've missed. I haven't kept good records.

Any thoughts on where I should start?

Answer 1

Talk to an accountant who practices tax accounting, not a income-tax filing service such as H&R Block, making sure that the accountant is at least an Enrolled Agent (EA) with the IRS. You might owe back taxes plus interest plus penalties (yes, there is a penalty for failure to file a tax return even if you do not owe the IRS any money and even are due a refund). Refunds that you might have gotten in years before 2008 are gone; you cannot claim them by filing a belated return, but taxes owed going back all the way to Year One are still due and are accumulating interest even as we speak.

Answer 2

Just to augment Dilip, the IRS has probably already filed your older returns for you and sent you letters hence your question.

You should definitely talk to an accountant (not a major firm since they will get you to file all years even if you don't need to / shouldn't), but there are some things you should know:

1. If you were below a certain income threshold (didn't make enough money), you don't have to file. Don't let an accountant file for you if you were below it. You'll incur pointless penalties.
2. If you have non-standard income such as self-employment, the IRS may have left out special taxes, so you may not want to file. Just compare their figure for such year where they filed for you to your accountant's and go with the better.
3. When the IRS files for you, they take into account only the standard deduction, so they ignore stuff like student loan interest payments.
4. You can negotiate a payment plan as long as the time to total payoff is ~3 years without disclosing your financial situation at all as long as the debt is < $50,000 & you've/they've filed all years you were required to file. Bid "high" on the monthly payment, and the person handling account may tell you what the true minimum is.

This is not tax advice. This is: talk to a local accountant that you trust and won't screw you.