Get Back on Track: Tips to Handle Unfiled Tax Returns

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Ergedine Pericles, February 17, 2025

Unfiled tax returns can feel overwhelming, but addressing them promptly is crucial to avoid escalating penalties and potential IRS enforcement. This guide outlines the necessary steps to take and how a qualified tax professional can assist you in navigating the process.

The Importance of Professional Help

Dealing with unfiled taxes is complex. It’s highly recommended to consult with a licensed professional such as a Certified Public Accountant (CPA) or an Enrolled Agent (EA). These professionals are bound by IRS Circular 230 and must adhere to strict security and compliance measures, including:

Written Information Security Plan (WISP): Outlining steps to protect sensitive data and prevent identity theft.
Secure Data Storage: Ensuring both physical and digital records are stored securely.
Disaster-Proof Backups: Keeping data backups to protect against unexpected losses.
Secure Data Disposal: Disposing of outdated records securely to maintain privacy.
Secure Online Platforms: Using encrypted platforms with SOC 2 certification to minimize cybersecurity risks.

How a CPA or EA Can Help with Unfiled Returns

1. Obtain IRS Tax Transcripts

A tax professional can retrieve your IRS records to identify missing tax years and understand your tax history. This includes:

Tax Return Transcript: Confirms previously filed returns and reported figures.
Tax Account Transcript: Shows filing status, income, payments, audits, and payment plans.
Wage and Income Transcript: Provides third-party income reports (W-2s, 1099s, etc.) to reconstruct past returns.

2. File Multiple Years of Returns

The IRS generally requires at least the past six years of returns to be filed for compliance, per IRS Internal Revenue Manual (IRM) 1.2.14.1.18 and Policy Statement 5-133.

3. Organizing Necessary Documents

Your tax professional will provide a detailed organizer or questionnaire to collect all required information for an accurate filing.

4. Minimizing Tax Liability

A CPA or EA will ensure all eligible deductions and credits are applied to lower your tax liability and explore penalty relief options.

5. Negotiating a Payment Plan

If you owe taxes, your tax professional can help establish an Installment Agreement or negotiate an Offer in Compromise to reduce the total owed amount.

6. IRS Account Monitoring

With IRS transcript monitoring, a CPA or EA can detect discrepancies or potential tax issues throughout the year and address them proactively.

7. Year-Round Support

Unlike seasonal tax preparers, CPAs and EAs offer continuous support for IRS notices, inquiries, and other tax matters.

Why Filing Your Tax Returns Matters

Filing your tax returns is essential for several reasons:

Faster Financial Approvals: Required for loans, mortgages, and financial aid.
Avoid IRS Penalties & Interest: Failure-to-file penalties, failure-to-pay penalties, failure-to-deposit penalties, and accumulating interest can increase tax debt.
Claim Refunds Before They Expire: Refunds must be claimed within three years, or they are forfeited.
Avoid Legal Issues: Willful tax evasion can lead to criminal prosecution.
Prevent IRS Enforcement Actions: Unfiled returns can trigger tax liens, levies, and wage garnishments.
Start the Statute of Limitations Clock: Filing starts the Assessment Statute of Limitations (ASED), limiting the IRS’s ability to assess additional taxes.
Avoid Substitute for Return (SFRs): The IRS may file a return on your behalf (SFR), excluding deductions and credits — leading to a higher tax bill.

Don’t Delay – Take Action Now!

Unfiled tax returns shouldn’t be ignored. At Ergedine Pericles, CPA, P.A., we specialize in helping individuals and businesses achieve tax compliance, minimize tax liabilities, and resolve IRS-related issues.