Tips for Filing Multiple Year Tax Returns

by Stephanie Faris ; Updated September 07, 2018
Tips for Filing Multiple Year Tax Returns

Every mid-April, taxpayers are expected to make sure they’ve filed their tax returns, whether they owe or are expecting a refund. But each year, a certain number of returns are missing as tax season approaches. Some taxpayers request an extension while others don’t earn enough to necessitate filing. However, for a portion of the population, procrastination turns into failing to file altogether, and sometimes for more than one year. When that happens, they’ll have to deal with filing at a later date, either in the same year or in a later year. This could lead to the need to file multiple tax returns at once.

How to File Multiple Years' Tax Returns

The most time-consuming part of filing for multiple tax years is at the start, when you need to gather all the documentation necessary to file. That includes all forms documenting your income for the year, including your W-2s, 1099s and 1098s. You’ll also need to pull information that can help you claim deductions, like receipts from business expenses or health care costs. Whether you’re filing manually or relying on tax preparation software or a professional service provider, all this paperwork will be essential to filing your taxes accurately and reducing your taxable income.

If you’re missing essential documents, you can request them from the IRS using Form 4506-T. This will allow you to get a transcript of all the information submitted on you for the missing tax years, which will help you backtrack. The second step will be to access the versions of each tax form specific to that year since these forms can change from one year to the next. You’ll also need to research tax laws related to those years, which will require some work if you aren’t using a tax preparer. You’ll then need to submit each form, along with the amount you owe in taxes plus interest and penalties, to follow through with your tax obligations.

Reasons for Multiple Tax Filings

The top reason for filing multiple tax returns at once is filing back taxes. The IRS will not let you file this year’s return and get a refund unless you’re up-to-date on your taxes. In other words, if you missed filing last year, you’ll need to address that before you can rest easy that this year’s taxes have been filed. You have three years from the original due date to file and get any refund the IRS owes you, but you’ll still need to file even if it’s beyond three years. If you owe taxes, you’ll owe the money, plus penalties and interest, no matter how many years have passed.

But you may also submit multiple tax returns even after filing every year previously. This is when you realize you need to correct something on a previous year’s taxes, perhaps discovered while you’re preparing this year’s taxes. This correction could result in a refund, as long as you file the amended return within the three-year deadline. If you’re due a refund on this year’s taxes, the longer you wait to file your past-year taxes, the longer that refund will take to make its way to you.

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Seeking Help

The biggest issue you’ll face in filing past tax returns is the changing laws. This is especially true since the Tax Cuts and Jobs Act, which made dramatic changes to the way taxes are calculated for each person. You may find you’re having a hard time matching the various tax laws as you try to complete forms from one year to the next. For instance, in one year, you can take personal exemptions and the next you can’t, but the standard deduction increased to compensate for it. That change will make those two tax returns dramatically different.

A professional tax preparer may be the easiest option as you try to get updated on your tax filings. Professionals follow the tax law changes closely and have the resources on hand to easily differentiate between years. If you choose to go the software route, you’ll need to invest in packages for each tax year and plug the information into each separately, which can get pricey and can be time-consuming.

Responding to an Assessment

Often those looking into how to file taxes on past years have received an assessment from the IRS, notifying them of taxes due. If you didn’t file taxes, the IRS isn’t flying blind as to how much you made that year. Your employer still sent information to the IRS as to how much you earned throughout the year. The agency can then use this information to estimate how much you likely owe for the tax year and often this won’t be fully in your favor. It likely won’t include itemized deductions, for instance, and it may not include lucrative benefits like child tax credits.

Once you’ve received an assessment estimating how much tax you owe, you’ll have a limited period of time to respond. You can dispute the assessment amount or accept it. If you find the amount the IRS assessed is accurate, you’ll have 45 days to pay the amount due to avoid further penalties.

IRS Substitute Returns

Instead of simply sending you an amount due, the IRS may go ahead and file a substitute return on your behalf. As with an assessment, this won’t include all of the important information, and those items make a big difference in reducing your taxable income. That is no substitute for your own return, though, which could actually result in you being owed money. The IRS recommends filing a return even if a substitute return has been filed on your behalf, whether it’s one month late or two years late.

Once you’ve submitted your return, the IRS will look at the new filing and compare it to the old, then make adjustments where necessary. If you’re due an additional refund, the agency will send the request over to processing. However, it’s important you file this return within three years of the original tax filing date to make sure you get the refund owed to you. If you’ve received the 90-day letter, CP3219N, you can no longer file an extension. You’ll need to respond to the tax court within the stated time period if you want to contest the amount of taxes the IRS stated you owe in the letter.

What to Do When You Owe

If you’re filing multiple years' tax returns and you’re sure you owe money, the best thing to do is go ahead and file as quickly as possible to reduce the penalties you may be racking up. You should remit as much as you can pay on your taxes to reduce the amount of interest being charged. Prepare your forms and supporting documents as described in the 1040 instructions and mail the information with your payment. If you’re mailing more than one tax return, mail them separately, in separate envelopes, with payment for each included. It’s best to avoid confusing the IRS to prevent delays or issues.

If you can’t afford to pay your taxes due, the IRS has a way you can handle it. You can apply for a payment plan on the IRS website, setting up either a short-term or long-term repayment option. You’ll pay a setup fee if you choose the long-term option and the amount will need to be taken out using direct debit installments. With a short-term payment plan, you’ll pay no fee and you’ll have the option of paying by checking, money order or debit/credit card. You can also pay in a variety of ways for a long-term payment plan if you pay an even larger setup fee. Fees can be waived or reduced if you qualify as low income.

The IRS also has something called an Offer in Compromise for taxpayers who simply cannot pay the amount due, even in installments. You’ll need to be completely updated on all tax filings to qualify and you’ll need to provide information on your income and expenses. The IRS will review the information and determine whether you qualify for a reduced amount. You’ll have to pay a $186 nonrefundable application fee to qualify and make an initial payment on your taxes due.

Filing an Extension

If you ever find that you can’t file your taxes by the mid-April deadline, you can always request an extension from the IRS. You can use IRS Free File to request that extension, and that request will act as a placeholder for you to come back to and file when you’re ready. You’ll be able to get a six-month extension, which puts your returns due in mid-October instead of mid-April. Unfortunately, a filing extension has nothing to do with paying the taxes you owe, so it’s important to know how much you owe and remit the amount to the IRS by the April deadline to avoid penalties and interest being assessed.

If you’d prefer to do things on paper, you can also use Form 4868, which is an application for an automatic extension. When you file the paperwork, you’ll enter your total tax liability for the year on line 4 and send a check for your payment to the IRS. You can also pay your tax debt electronically or sign up to have it debited from your bank account. By filing for an extension, you’ll be able to bypass the more expensive penalties associated with failing to file and, at worst, pay the much lower penalties for paying late. If you pay the full amount in April, you’ll avoid penalties altogether.

Waiving Penalties

Before you file previous years taxes, it’s important to know that the IRS may be willing to work with you if you have a good reason for missing those filings. However, this will be much more effective if you’ve missed one filing and gotten in touch with the IRS as soon as possible, rather than delaying for year after year. In order to have your penalties waived, you’ll need to provide “reasonable cause to the IRS,” which is where you simply explain the good reason you had for failing to file in the tax year in question and throw yourself at the IRS’s mercy. If you can make a good faith payment along with your request for that mercy, you’ll be more likely to be successful. Acceptable justifications for reasonable cause can include being a victim of a natural disaster, inaccurate information provided by the IRS or civil disturbances like divorce.

In order to claim reasonable cause, you’ll need to mail an explanation to the IRS at your local service center or call 800-829-1040. If you have documentation backing your reasonable cause, it can help. You can expect to still have to pay interest on the overdue amount, but this may at least get your penalties waived. Interest will still continue to accrue until the amount you owed the IRS is marked “paid in full.”

About the Author

Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a ghostwriter for a credit card processing service and has ghostwritten about finance for numerous marketing firms and entrepreneurs. Her work has appeared on The Motley Fool, MoneyGeek, Ecommerce Insiders, GoBankingRates, and ThriveBy30.

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