When you are preparing to file your federal income tax return this year you may realize that you didn’t file a tax return last year, or in previous years. There are different reasons taxpayers don’t file a return. They may have thought they were not required to file a return; they may have meant to file a return but simply forgot; they may have overlooked a deduction or credit they could have claimed but didn’t know about it at the time and therefore didn’t file a return in order to claim it; they may have owed taxes and didn’t file a return because they couldn’t pay the taxes they owed; or this could be the first year they have to file.
If this is the first year you have to file a federal income tax return and you know you were not required to file last year, you have nothing to worry about. But if you did not file a return last year, or a previous year for one of the other reasons, you should first determine whether you were required to file, whether you can obtain a refund, or whether you owe taxes.
Why File a Prior Year Return?
It’s important to file prior year returns to keep your record with the Internal Revenue Service (IRS) current and up-to-date. If you are due a refund, you must file a return to claim it, and if you owe taxes you will eventually have to pay them, and the longer you wait the more penalties and interest you will have to pay.
To Claim a Refund
If you find that you could have claimed a deduction or credit that would have entitled you to a refund if you had filed a return, you can still file and claim the refund. You can claim a refund for up to three years after the original due date for the return. But you must file a return in order to claim the refund. After three years you lose the right to claim the refund.
You should also keep in mind that if taxes were withheld from your pay last year or in a prior year and you were not required to file a tax return because your income was below the limits for filing a return, you may still be entitled to a refund if too much tax was withheld, or if you could claim the earned income credit.
If you did not file a return and you have a balance of taxes you owe for a prior year, the fact that you have not received a notice from the IRS does not mean the problem has gone away. Not paying your taxes can have a negative effect on your credit history and the IRS could take action to collect the taxes owed, such as garnishing your wages or placing a lien on your assets. Also, if you can claim a refund this year, or in a later year, the IRS may hold your refund until you file your tax return for the prior year.
If you owe taxes for a prior year and cannot pay them now, you can request an installment agreement from the IRS. If you owe $25,000 or less in combined tax, penalties, and interest, you can use the Online Payment Agreement (OPA). You can find this option on the “Tax Information for Individuals” page of the IRS website at http://www.irs.gov/individuals/index.html. Or you can fill out Form 9465, Installment Agreement Request, and mail it in to the IRS. This form can be found under “More Forms and Publications” on the IRS website.
If you are self-employed, you receive credits toward Social Security retirement or disability benefits based on the self-employment income you report on your federal income tax returns and the self-employment tax you calculate on Schedule SE of Form 1040. If you do not file a tax return this self-employment income is not reported to the Social Security Administration, thereby decreasing the benefits to which you will be entitled.
Determine Whether You Should Have Filed a Return
To determine whether you should have filed a tax return for last year or a prior year, you can check the filing requirements in the instructions for Form 1040, 1040A, 1040-EZ, 1040-NR, or 1040-NR-EZ. The limits change each year so it is important to refer to the filing requirements for the applicable year.
You can request tax forms and instructions for prior years at any IRS office, or you can view and download them from the IRS website at www.irs.gov. On the home page, select the option “More Forms and Publications” on the left side of the screen. On the next page, select “Previous Years”. The next page will show the years for which forms are available. Select the year you need and a screen will open with all the forms and instructions available for that year. In the instructions for any of the above-referenced forms you can find the filing requirements for that year.
If you meet the requirements for filing a return, you should file a return. If you do not meet the requirements, but you think you may be entitled to a refund because too much tax was withheld, or you qualify for a refundable credit such as the earned income credit, you should do a calculation of your tax for that year. You should take into account all your income and adjustments, and all the deductions and credits for which you qualify, to determine your taxable income. Then you compare the total tax per the tax table or tax rate schedule for that year to the amount withheld to see if you are entitled to a refund. If so, you should file a return to claim the refund, if you are within the limit of three years from the original due date for the return.
Penalties
There is a “late filing” penalty, or “failure to file” penalty that applies when you owe taxes for the prior year. Interest charges also accrue on the balance owed, so it is to your advantage to file the return as soon as possible. If you are due a refund there is no penalty for failure to file.
How to File a Prior Year Tax Return
Gather all records of your income and tax-deductible expenses for the applicable year, including Forms W-2, 1099’s, and 1098’s. If you do not have these forms, you can request a transcript from the IRS as explained below. Obtain the forms you need for that year from an IRS office or download and print them from the IRS website. Complete all applicable forms, sign and send your return to the IRS address indicated in the instructions. You do not need to calculate the penalty and interest, if applicable. The IRS will calculate that for you.
Tax returns for prior years can be prepared using tax software, but cannot be electronically filed. The completed forms must be printed out, signed and mailed to the IRS or be presented by hand in an IRS office.
As indicated above, you can get prior year tax forms from IRS offices, or you can download and print them from the IRS website by selecting “More Forms and Publications” on the home page, and then “Previous Years” on the next page.
Be sure to use the forms corresponding to the year for which you are filing a return. Also, when you are filling out the forms, be sure to use the correct amounts for exemptions and the standard deduction for that year. These amounts change each year. You must also use the tax tables corresponding to the year for which you are filing, and not this year’s tax tables. You can find the tax tables in the instructions for that year’s tax forms, or you can download the tax tables separately.
How to Get W-2 and 1099 Information
If you need a copy of your Form W-2 from a prior year, you should request it from your employer. The IRS can provide a copy of your W-2 but only if you filed a return. Nevertheless, the IRS can provide you with a transcript of the information on your Form W-2, and on the 1099, 1098 and 5498 series. To request this transcript you need to file Form 4506-T, Request for Transcript of Tax Return. This form can be downloaded from the IRS website at www.irs.gov and there is no charge for requesting this transcript.
Complete the information on the top of Form 4506-T and check the box on line 8 for Form W-2, Form 1099 series, Form 1098 series, or Form 5498 series transcript. Be sure to indicate the year for which you need the information on line 9.
