Every new year it gets back on to your radar: you haven't filed taxes for awhile. Is this the year to do it? With the new tax cut legislation, you are thinking about it even more. Maybe your wife wants to buy a house and you are worried the lender might want to see returns? Maybe you are concerned that you will owe taxes? Maybe you are worried about getting a hold of your old W2's or 1099's? Let's look at more motivations to file and some solutions...
Motivations to file taxes
It's the law. If you are unlucky, the IRS and DOJ can prosecute you criminally as a non-filer.
It's hard to get a loan, if you are a non-filer.
If you are self-employed, filing and paying taxes is how you fund your Social Security.
If you don't owe taxes, you might be getting refunds.
If the IRS sends you a letter or a Revenue Officer contacts you, you will have to file.
How to get back into the system.
Expecting refunds? File the three or four most recent tax years and enjoy your refunds. If the IRS asks you to file the older years, comply, but don't anticipate refunds as those years will be past the statute of limitations for refunds.
Owing taxes and able to pay? If you haven't filed a lot of years, you could try filing the most recent years (one, two or three) and pay all of the taxes due plus penalties and interest. This strategy might satisfy the IRS. If you stay compliant going forward, it just might work out.
Owing taxes and unable to pay? If you haven't filed many years, you could file your last seven returns and then work out a livable installment agreement, have your debt declared as "currently not collectible," or arrange a settlement or Offer in Compromise. If you are self-employed and settle your debt with IRS, you will also restore your Social Security credits at a substantial discount while getting square with the IRS.
