Filing back tax – All You Should Know

Filing a late income tax return is more common than you might think. April is the annual deadline for filing back tax. However, if for some reason, you were not able to do back taxes file, it is not the end of the world. But it should be done in the correct way. Now you know that it is better to file back taxes late than never. Through this, you can prevent interest, pay penalties, and catch up on any late tax payments. Here are a few steps that will help you file back taxes and come to good terms with the Internal Revenue Service

Tracking down the paperwork for filing back tax

Depending on how far back you are filing returns for, you might have to do some legwork. This includes tracking down the documentation for the income and deductions. If you are an employee and don’t have your income paperwork, you can contact the payroll department at your employer’s. They usually retain a copy of a prior W-2. If you are self-employed, you will have to contact current and prior clients with a record of 1099 they had to send you before. You can even request a transcript of W-2s, 1098s, and 1099s from the IRS by sending Form 4505-T. Even if you are late in the back taxes file, you are eligible for credits and deductions. But, you must have the documentation to prove it. You will be needing paid receipts for proving your eligibility. Bank and credit card statements are easy to locate and can be used for documenting expenses.

Downloading tax forms of previous years to file back tax

You can get tax documents of prior years from online tax preparation services. The IRS website also contains some past tax documentation. You might be filing back tax for a couple of years back. The filing instructions for the current year might not be applicable to that year’s tax forms. So, apart from the old forms, you also need to download the filing instructions for that year. Only then will you be able to fill your forms properly.

Sending the forms and payment

After you have prepared all your forms, you have to mail them along with the payment. You will have to calculate interest and penalties. You have to make sure that you at least cover the original bill and an estimate of penalties and interest. The IRS will be notifying you of any refund or outstanding payment after they have received and processed the back tax return. To ensure that everything goes smoothly, you have to hire the top tax defenders. They will help you to file back taxes.

Here are some mistakes that you absolutely have to avoid while filing back tax late.

Having done nothing in April

The IRS doesn’t mind if you are planning to file back tax late. All it asks is that you fill the Form 4868 for requesting an extension and getting more time. However, to get the tax filing extension, you have to request it before the deadline. If you don’t do this, you will have to pay a late-filing penalty. This is equal to 5% of the total amount due every month for which your return is late. The maximum penalty that can be imposed is 25% of the owed amount. For example, if you owe $1,000 in taxes, you might have to pay $250 extra as a penalty for the late back taxes file.

Assuming that you only owe the tax

Filing back tax late has some consequences. For any amount outstanding the deadline, you will have to pay the interest. It won’t matter even if you have an extension. The only exception to this is when you have paid about 90% of the tax liability before the deadline. You will be allowed to pay the remaining amount when you are sending in your return. The bottom line is that if you owe money to the IRS, it is best to pay as much as you can before the deadline or when you are requesting an extension. To get the right amount, you have to take the help of top tax defenders and tax relief experts.

Assuming that you have to ask

In some cases, the IRS grants extension to taxpayers, even if they don’t ask for one. However, if you don’t know the rules, it will confuse you and cost you time. Take the example of a US citizen or resident living and working outside of the country. In such cases, they get more time for filing and paying their taxes, without them requesting an extension. Another example is people that are affected by natural disasters. IRS grants extension to such people. You will have to check the list of qualifying disasters. Some military personnel might also get a back tax filing extension automatically. However, it will depend on what they are doing and where they are deployed.

Assuming you have extra time for getting it together

When you request an extension the standard way, it gets you an extra 6 months for filing back tax. This means that you have to file back tax before the middle of October. However, this deadline is different for people who got an automatic extension on back tax filing. For the out of the country crowd, the extension is just for 2 more months. For people affected by natural disasters, the amount of extra time given can vary. Military personnel can get more than 6 months for filing in some situations.

Forgetting about the deadline of the extension of back taxes

If you miss the deadline for your extension, the IRS will be socking you with an extra 5% penalty for late tax filing. If you missed the deadline by over 60 days, you will have to either pay what you owe or $435, whichever is smaller. So, always remember to stay on the top of the amount you owe and the deadline. However, the IRS might still throw you a lifeline. If you have a reasonable explanation for your failure to file back tax, you might not have to pay the penalty. You will be attaching a written application along with your return.

Being afraid of the IRS

You don’t have to fear the IRS and rush meeting the deadline for filing back tax. This puts you at risk of missing valuable deductions or making a mistake on the return. The IRS won’t be blacklisting you if you seek an extension. It is very common to file back tax late. In fact, for investors who don’t get their K-1s, extensions are a part of the process of filing back tax. K-1s are the income statements from partnerships. As long as you get the extension for back tax filing, you won’t face any trouble. 

If you are having trouble dealing with this alone, you can hire a tax relief service like the Platinum Tax Defenders. Since 2011, they have been helping people file back tax accurately. Our tax relief experts can also help in getting tax resolution. So, book an appointment with the Platinum Tax Defenders for a free consultation today!