16 Jul My friend never filed my taxes for 10 years. What do I do?

Q. I recently found out that back in January of 2020 that my friend, who was supposed to be doing my taxes for 10 years, had never filed for me. He had all of my tax receipts and the passwords to my ADT accounts where he could pull my end of your tax statements. By the time I found out he died, his apartment had been cleaned out and nobody saved any of the paperwork he had in his files. How do I approach the IRS with this? And will this affect my social security if I’m not caught up with the IRS by age 66? How do I clean up this mess?
— In trouble

A. It sure is a mess, but you can take steps to correct your standing with the IRS.

But it’s not uncomplicated.

First, a taxpayer is ultimately responsible for the timely and accurate filing of their own income tax returns, said Bernie Kiely, a certified financial planner and certified public accountant with Kiely Capital Management in Morristown.

Before e-filing of federal income tax returns was a thing, a taxpayer would have to sign and date their tax returns and attach a check prior to mailing their tax return to the IRS, he said.

The IRS started electronic filing nationally in 1990. E-filing did not become mandatory for professional tax preparers until tax year 2008, he said. Starting in the 2008 tax year, a tax client of a professional tax preparer had to opt-out of e-filing.

We’re assuming your friend, as your tax preparer, never sent you a hard copy of your tax return for your files and did not return your tax papers to you.

“This should have been a big red flag that something wasn’t right,” Kiely said. “When I e-file a tax return for a client, I send them a hard copy of their return and all of their original source documents. I have a PDF file of their return plus I scan all their original documents into my computer which is backed up off site every night.”

Kiely recommends you reach out to the IRS in writing about your predicament, sending a letter Certified Mail with a Return Receipt Request. You should contact all the employers you worked for during the period in question to see if they can get you a replacement W-2.

Also in your question, you mentioned your ADT accounts. Some of the information you will need may still be there.

Finally, the IRS might have copies of all your tax documents which are supplied by employers, banks, brokerage firms and more, he said.

Now for some bad news.

If you owe taxes for those missing years, you still owe the tax plus interest plus penalties, Kiely said.

The statute of limitations is for three years from the date you filed the return. If you never filed a return the statute never starts, he said. If you have a refund, you have up to two years to file for a refund. Once the two-year period runs out, you forfeit the refund, he said.

“I once had a client who didn’t file for ten years. In the early years he had refunds. He owed additional taxes in the later years,” Kiely said. “I reached out to the IRS. I said I know he forfeits the early refunds, but can he use the forfeited refund to lower the taxes he owed in the later years? The IRS said no.”

As far as your Social Security benefits are concerned you are in better shape if you were an employee. Your employer reports your annual earnings directly to the Social Security Administration, Kiely said.

“If you were self-employed your earnings are reported to Social Security by the IRS,” he said. “They get the information from your tax return.”

We hope that helps you get started in fixing your tax mess. Good luck.

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This story was originally published on July 16, 2021.

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.