Filing taxes is one of those tasks that’s all too easy to put off—but missing a deadline can really come back to haunt you. That's where back taxes come into play. Simply put, back taxes are any taxes you owe from previous years that haven't been paid yet. Whether you forgot to file, made a mistake on your return, or just couldn’t afford to pay the amount due, those unpaid taxes quickly start to pile up—and so do the consequences.
Knowing how to file back taxes correctly can help you avoid further issues. Keep reading to find out why it’s important to get your tax situation back on track and how late you can file, plus get a step-by-step guide on how to do it right.
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What are back taxes?
Back taxes are taxes you owe from a previous year that haven't been paid yet. Over time, these unpaid amounts accumulate—and they won’t go away until you address them. If left unpaid, they can lead to mounting interest and penalties, making the debt grow larger and harder to manage. So, the longer you wait to file your back taxes, the more you'll end up owing.
Why it's important to file your back taxes
Filing your back taxes is more than just a way to catch up with the IRS—it can actually benefit you in several ways:
- You could claim a tax refund: If you overpaid your taxes in a previous year, you could be due a refund from the IRS. But you need to file your back taxes to make it happen. You have a three-year window from the original filing deadline to claim this refund. After that, the money goes to the IRS.
- You avoid penalties and interest: The longer you delay filing your back taxes, the more you’ll owe. The IRS charges a failure-to-file penalty of up to 5% of the unpaid taxes per month, with a maximum of 25%. On top of that, there’s a failure-to-pay penalty and daily interest on your unpaid balance. Filing as soon as you can helps stop these extra costs from piling up and keeps your debt from getting bigger.
- You protect your Social Security benefits: Your Social Security benefits are calculated based on your earnings reported in your tax returns. If you don’t file, those earnings might not be properly recorded, which could reduce your future benefits. Filing back taxes ensures your work history is accurately reflected, so you can receive the full benefits you’re entitled to when you retire.
- You improve your loan prospects: When you apply for a loan, lenders often require copies of your recent tax returns to verify your income and evaluate your financial situation. Not having filed your taxes might raise concerns for lenders and hurt your chances of approval. By filing your back taxes, you’ll have the necessary documentation to secure a mortgage, car loan, or even financial aid for education.
Beyond any potential benefits of filing, it’s important to consider the negative consequences of not filing:
- IRS collection actions: If you don’t file your taxes voluntarily, the IRS has several tools to collect what you owe, including taking portions of your wages directly from your paychecks, placing liens on your property, or even seizing your bank accounts. Once the IRS starts these collection actions, it becomes much harder and more stressful to resolve your tax issues. It’s better to file your taxes before things reach that point.
- Substitute returns: If you don’t file a return, the IRS might file a “substitute return” on your behalf. While this might seem helpful, it's not in your best interest. The IRS will use the information it has to create a return, but it won’t include any deductions or credits you might be eligible for, often leading to a higher tax bill than if you had filed yourself. Plus, you’ll still be on the hook for any penalties and interest that have accrued.
- Impact on your credit: Although tax debts themselves don’t appear on your credit report, the IRS can file a tax lien against you, which will show up and significantly lower your score. This can make it harder to get loans, credit cards, or even rent a home.
- Loss of privileges: If you owe more than $59,000 in unpaid federal taxes (an amount adjusted annually for inflation), the IRS can request that the State Department revoke, deny, or limit your passport. Some states can also revoke professional licenses, driver's licenses, or other permits if you don't address your tax obligations. Additionally, certain government benefits might be affected by outstanding tax debts.
How far can you go back to file taxes?
Generally, you can file federal tax returns for the past three years. This three-year period starts from the original filing deadline, typically April 15th. If you miss this window, you may lose any refund you're entitled to, though you'll still need to file to address any outstanding tax obligations.
And how many years can you go back to claim refunds?
The IRS allows you to file back taxes for up to three years to claim a refund. After this period, any overpaid taxes become the property of the U.S. Treasury, and you won't be able to recover the money.
It’s important to note that while the IRS has this three-year limit, state tax agencies may have different rules. Some states have shorter or longer periods, so be sure to check your state's guidelines.
How to file back taxes (for free) in 5 steps
Dealing with back taxes can feel overwhelming, but taking it one step at a time can make the process easier to handle.
1. Gather your documents
Having the right paperwork is key to filing accurately and efficiently. Here’s what you’ll need:
- Tax returns: Collect copies of any previous returns you have
- W-2 forms: These show your wages and the taxes withheld by your employers
- 1099 forms: For freelance or contract work income
- Other income documents: Include records of any additional income, like rental property or investment earnings
- Deduction and credit documentation: Receipts, invoices, or other proof of eligible deductions or credits
2. Request a transcript
If you're missing some records, the IRS can help by providing a transcript, which details your tax information, including income from employers and other sources. You can request a transcript online through the IRS website, by phone, or by mail. Ensuring you have accurate information is crucial to avoiding errors and potential penalties, so take this step seriously.
3. Choose the right forms
The primary form for individual income tax returns is the 1040, but depending on your situation, you might need additional forms. For example, Schedule A is used for itemized deductions, and Schedule C is for reporting business income. If you need to amend a return, you'll use Form 1040X.
Don’t forget about state tax returns if they apply to you—you’ll need the appropriate state forms as well.
4. File your return
Once your documents and forms are ready, you can file your return through the IRS website, using tax software, or by mailing a paper return. Taxpayers whose AGI is $79,000 or less qualify for a free filing. Doing it electronically is usually faster and can help you avoid some common errors.
5. Consider a payment plan
The IRS offers payment plans that let you pay off your tax debt over time. You can set up an installment agreement online or by contacting the IRS directly. Be aware that interest and penalties will keep accruing until the full debt is paid off, so it’s wise to pay as much as possible upfront.
Bonus tip: If you’re unsure about how to proceed, consider consulting a tax professional. They can offer personalized advice and ensure that your returns are filed correctly. There are also resources available for free or low-cost tax help, such as IRS Free File and Volunteer Income Tax Assistance (VITA) programs.
FAQs
How to file back taxes online for free?
You can file back taxes online for free using the IRS Free File service, which is available for individuals with adjusted gross income (AGI) equal or lower than $ 79,000. Additionally, some tax software companies offer free filing for previous years if you meet their criteria—income level, age and complexity of the tax return are some examples.
You’ll need to gather all necessary documents, such as W-2s and 1099s, before you start. The process is similar to filing current-year taxes, but you’ll need to ensure you’re using the correct forms for the specific tax year.
How many years can you go back to file taxes?
You can generally file tax returns for up to three years to claim a refund. If you’re owed a refund but file after this period, the IRS might not issue it. However, there's no time limit on how far back you can file if you owe taxes. Keep in mind that the IRS can still pursue collection actions for unpaid taxes, regardless of how old the debt is.
How to file back taxes without records?
If you’re missing tax documents like W-2s or 1099s, you can request a transcript from the IRS. This transcript will give you a summary of your tax information for previous years. You can also contact your employers, banks, or other financial institutions to request copies of any missing records. Once you have the necessary information, you can proceed to file your back taxes using the appropriate forms for each tax year.
How far back can you file taxes and get a refund?
You can file tax returns to claim a refund for up to three years from the original filing deadline. For example, to claim a refund for your 2020 taxes, you must file by April 15, 2024. After this three-year window, the IRS typically won’t issue a refund, even if you overpaid. However, exceptions may apply in certain situations, such as if you were unable to file due to specific circumstances like disability or a natural disaster.
What happens if you don’t file back taxes?
Failing to file back taxes can lead to serious consequences. The IRS may file a substitute return on your behalf, which likely won’t include deductions or credits you may be eligible for, resulting in a higher tax bill. The IRS can also take collection actions, such as wage garnishment, liens, or levies on your bank accounts. Additionally, unpaid taxes can affect your credit score and your ability to obtain loans or other government benefits.
Need more help with tax season? Read this: When and How To Pay Your Taxes: All the Answers Here