I haven’t filed taxes in three years. What to do?

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 Q. I haven’t paid taxes in three years. I know – it’s bad. I know I won’t have a big lump sum to pay when I finally file, so I’ve been avoiding it. Will the IRS work with me on this? What do I need to know before I contact them?

A. Yes, the IRS will work with you on this, but first, you’ve got some work of your own to do.

The first step in getting out of your tax mess is calling the IRS. They will want to verify who you are so you’ll need your name, address, social security number, employer and current salary, said Joseph Matheson, a certified public accountant with Matheson & Assoc. in Whippany.

“The IRS will want you to commit to a timeframe to file all delinquent tax returns,” he said. “If you find you are having trouble meeting the deadline, call the IRS to request an extension. They will usually give it to you.”

Matheson said you’ll want to get account summaries from the IRS detailing:

• Your Transcripts, which will show what others reported to the IRS
• What returns have already been filed — the IRS file on your behalf based on what info they have
• What taxes you currently owe
• Whether your refunds have been applied to delinquent taxes

You can then file tax returns for each year you were required to file, based on your most accurate estimation of your income, deductions and filing status for each year, he said.

If you don’t have W-2 forms for your income for years past, you can try to reconstruct what you earned based on paystubs, checkbook registers or other similar documentation.

“If it turns out you are owed a refund in an earlier year, the IRS won’t let you receive the past refund or credit the amount against any money you owe if it’s been more than three years,” Matheson said.

Then once you’ve filed all your returns, the IRS can tell you how much tax you owe and the exact amount of penalties and interest, he said. Then you can set up a payment plan or discuss an offer of compromise with the IRS, Matheson said.

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This post first appeared in March 2015.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.
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