Filing Back Taxes With Tax
Using an online tax-filing service will cost money, but it will offer more guidance and information about which forms you need and how to complete them. However, some online products only allow you to access a few years of prior-year tax forms. Select services do allow you to e-file back taxes for certain tax years, but itâs likely that you will need to print your tax return after filling it out and then mail it to the IRS.
What Are Back Taxes
Back taxes refer to an outstanding federal or state tax liability from a prior year. Federal income tax returns are typically due each year on April 15. You may request an extension to file your taxes, which gives you another six months to file your return. However, even if your extension is approved, you must still pay your tax bill by the required due date.
How To Repay Back Taxes In Canada
Not paying your back taxes is serious business. Those most susceptible to letting taxes lag from one year to the next include part-time workers and the self-employed. Statistics Canada shows that in 2012, more than 2.6 million Canadians worked for themselves.
Disciplining yourself to set aside money every week in a tax account requires a lot of discipline, notes Caroline Thompson, president of Thompson Accounting and Tax Inc. This is especially true if money is tight and the economy is poor.
However, there are ways to file for past years and repay back taxes. Some options even offer ways to forgo penalties and prosecution.
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Is It Safe To File My Taxes Online
Maybe youre nervous about filing your taxes online. Rest assured that at TurboTax, security is built into everything we do. We use multi-factor authentication, data encryption, and data safeguards to make filing your taxes online safe. Learn more about security at TurboTax.
As well as ensuring that weve taken every security precaution in our products, TurboTax Free connects securely with the government through CRAs Auto-fill my return to import your data into your return and submits your electronic return if you file online through the CRAs NETFILE service. For an additional layer of security when you file online, learn about using the CRAs new NETFILE Access Code to authenticate your identity when you submit your taxes this year.
What Do I Do If I Owe Back Taxes
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Filing Back Taxes In Canada
You should file your taxes on time. This is the best way to avoid interest charges, penalties, and additional hassle from the Canada Revenue Agency . However, for many reasons, people sometimes do not file their taxes when they should. Maybe you forgot or maybe you didnt realize that you needed to file. Maybe you did not file on purpose. Sometimes, people believe that its in their best interest to not file their taxes if they dont have the money to pay their tax debt. This isnt true, but its a common belief and it happens.
For whatever reason, if you didnt file your taxes when you should have, and now youre wondering how far back you can file taxes in Canada, the good news is that it is possible to file prior year returns.
Complete And Submit The Return Forms
Though the specific list of forms needed to file back taxes depends on your personal financial situation, below are some of the documents you’ll likely have to round up for the year you need to file.
Forms for filing back taxes
- Form W-2, a wage and tax statement
- Form 1099-G if you received unemployment benefits
- forms 1099-MISC or 1099-NEC if you completed contract work or received certain kinds of payments
- forms 1099-INT and 1099-DIV if you had interest income or dividends
- Form 1099-R if you took distributions from a retirement account
- Form SSA-1099 if you got Social Security benefits
- Form 1098 if you received over $600 of mortgage interest
- Form 1098-T if you paid tuition expenses
- records that prove you’re eligible for certain deductions and credits
Where to submit back taxes
The IRS says you can “file your past due return the same way and to the same location where you would file an on-time return,” though if you received an IRS notice you should follow its instructions.
We’ve rounded up the best tax software programs here, but note that the fine print may be different for the current year than it is for back taxes.
For example, tax prep service TurboTax has links on its website where you can buy products to prepare your 2018, 2019 and 2020 taxes, though it says “you will have to print out and mail in your tax return for previous years.” In other words, you can’t file these tax returns online through TurboTax.
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Request A Tax Transcript From The Irs If You Can’t Get Copies From The Payers
Today, many employers and financial institutions will make your tax forms available to you online. Many will allow you to access these forms at any time, but sometimes this information is only available in a very short window. If the company has gone out of business, it can prove difficult or impossible to get these records directly from the source.
If your employer or clients will not release copies of your tax forms, you can see which forms were filed with the IRS by requesting a tax transcript.
A tax transcript details types of income that were reported to the IRS, such as:
- Canceled checks
- Deposit slips
Even if you are not self-employed, you may have miscellaneous income that must be reported, such as proceeds from personal property sales or a winning lottery ticket. You could also be missing crucial deductions for health insurance and medical expenses, charitable donations, and student loan interest payments. Make note of these items in a spreadsheet.
If you are self-employed, it’s a good idea to start separate bank, credit card, and payment processor accounts so that your business expenses are easier to differentiate from your personal expenses, and more likely to be deductible as a result.
Pay Social Security Taxes To Qualify For Benefits
Self-employed individuals have to pay Social Security taxes through their estimated tax payments and individual income tax returns. By filing a return and paying the associated taxes, you report your income so that you may qualify for Social Security retirement and disability benefits when you need them.
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What Happens If You File Your Taxes Late
You may wonder what happens if you dont file your taxes or what happens if you file your taxes late. In Canada, these are two different situations and the consequences of both are also different.
Not filing taxes when you are required to file them can be considered a crime, so its critical to file your returns, even if they are late and you cannot afford to pay immediately.
Tax evasion has serious consequences. Not paying your taxes is a crime, and has major financial and personal costs. If you are convicted of tax evasion, it can also lead to court-imposed fines, jail time, and a criminal record.
If convicted of tax evasion, you must repay the full amount of taxes owing, plus interest and any civil penalties assessed by the Canada Revenue Agency . Courts may impose a 5-year jail term or fine of up to 200% of the evaded taxes amount.
If you are required to file your taxes, you should file your taxes in full and on time. If you cannot file your taxes on time for whatever reason, you should take action and file them as soon as possible.
The longer you wait, the more difficult your situation could become. Late filing penalties, interest, and other fees add up the longer you go without filing.
In fact, you should even file your taxes if you do not owe any money. Filing taxes late when you dont owe the Canada Revenue Agency any money is still a mistake.
Next Steps: Plan Ahead For Next Year
Filing accurate tax returns by the filing deadline and paying all the tax you owe on time goes a long way to help you avoid problems with the IRS. Dont wait to clear up your back taxes before getting a jump start on this years tax return.
Start a file for all your tax documents, such as income statements from your employer, interest statements from your bank or receipts for deductible expenses you hope to itemize. Having everything in one place will be helpful when its time to prepare your return.
You can use the IRS Tax Withholding Estimator to help ensure youre having the right amount of tax withheld from your paycheck. If you have too little withheld throughout the year, you could face a tax bill when you file next year. And if you withhold more than necessary, you could get a refund next year.
Relevant sources:IRS Publication 5123 | IRS Tax Withholding Estimator | IRS: Filing Past Due Tax Returns | IRS: Free Tax Preparation for Qualifying Taxpayers | IRS News Releases | IRS Internal Revenue Manual | IRS: Eight Facts on Late Filing and Late Payment Penalties | IRS Fact Sheet: Help Yourself by Filing Past-Due Tax Returns | IRS: Extension of Time to File Your Tax Return | IRS Topic No. 202 Tax Payment Options
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What If I Owe More Than I Can Pay
If youre facing a tax bill you cant afford to pay in full right away, you may have payment options.
- Consider paying the IRS with a credit card or personal loan. Using credit to pay your tax debt likely means youll pay interest to the lender. But those costs may be less than the penalties and interest you might face if you fail to pay the IRS on time and in full.
- If you owe $50,000 or less, you can request an online payment agreement from the IRS. Short-term installment agreements give you 120 days or less to pay. A long-term agreement can give you up to 72 months to pay what you owe in monthly payments.
- If you meet certain criteria, you may be able to ask the IRS for an offer in compromise, which could allow you to settle your tax debt for less than what you owe.
- In dire cases when paying anything might prevent you from covering your basic life expenses, the IRS may agree to temporarily delay collection of your past-due tax debt.
Do You Even Have To File Taxes
Even if you dont have to file taxes, you might want to do it anyway: You might qualify for a tax break that could generate a refund. So give tax filing some serious consideration if:
You qualify for certain tax credits.
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Paying Debts And Collecting Tax Refunds
Paying any tax due on each completed return is relatively simple. The IRS wants your money, so it doesnt make the process challenging. You can go to its Direct Pay website to pay by electronic debit from your checking or savings account, and the IRS accepts credit card payments on its website, as well.
Keep in mind that there are time limits for refunds, audits, and debt collection. In most cases, your refund “expires three years from the date your tax return was due. But if you owe other tax debtsbecause you have a balance due from another year, for exampleyour refund will typically be applied to offset that debt.
Create a plan for paying off your tax debts if it turns out that you owe the IRS money. You might also want to plan on how to protect yourself from an IRS investigation, assessment, federal tax lien, or possibly a levy. You may have a few options, such as setting up an installment agreement with the IRS for a monthly payment plan or asking for an offer in compromise.
The IRS can and will impose penalties and interest on tax liabilities that aren’t paid in full by the deadline for the tax return.
How Can I Catch Up On My Unfiled Tax Returns If I Dont Have Any Documentation
The first question we normally get from our clients in such a case is what if I dont have all of my income documentation? Maybe you lost your W2 while moving. Maybe you lost it in a fire or flood. The good news is that in most cases, thats not a problem.
As part of our tax transcript analysis, we can also obtain a wage and income transcript. This transcript shows data from information returns the IRS receives such as Forms W-2, 1099, 1098 and Form 5498, IRA Contribution Information. We would use these transcripts to assist us in preparing your unfiled tax returns
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What Penalties Are There For Filing A Late Tax Return
The IRS has a number of penalties they can assess when you file a tax return late. Simply filing the return late can result in a failure to file penalty. If you owe tax on those returns, but did not pay prior to April 15 of the following year, you may also get a failure to pay penalty. These penalties are in addition to the interest youd owe on any unpaid tax.
Can I File My Taxes Online For Free
In Canada, TurboTax makes it simple for anyone with any tax situation to file their taxes for free. These are just a few of the tax situations you could have and use TurboTax Free to file your taxes with the CRA:
- Youre working for an employer and/or are self employed
- Youre a student looking to claim tuition, education, and textbook amounts
- You were unemployed for part or all of 2020, including if you claimed CERB
- Your tax situation was impacted by COVID-19, including if you had to work from home and want to claim related expenses
- You have dependants and want to ensure you claim all related credits and deductions
- Youre retired and receive a pension
- You have medical expenses to claim, including amounts related to COVID-19
- Its your first time filing your taxes in Canada
There are a few situations where youll need to print and mail your return instead of filing online using NETFILE. Dont worry though, you can still enter all your tax info online and well guide you through the process of mailing your return to the CRA.
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How Do I File Returns For Back Taxes
When would someone file back taxes, and what does this process typically look like?
Should you file back taxes? It may not be too late to file a previous year’s tax return to pay what you owe or claim your refund. Learn more about why one may choose to file back taxes and how to start this process.
Why Should I File A Tax Return
Every international student and their dependents are required to filetheir tax return if they were in the US during the previous calendar year. While filing your tax return may sounddifficult, there are a number of benefits to doing so other than its the law:
- You might get a refund – Some international students will qualify for a refund due to taxtreaties and a lack of serious income if theyve earned income in the US.
- Protect taxation of your worldwide income.
- You fulfill your visa obligations – All international students must file at least Form 8843 in order to remain legal under F, J, M & Q visas, even if you didnt earn any money in the US.
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Documents For Tax Credits And Deductions
Tax deductions and tax credits reduce the amount of income tax you owe for the year . You may need to gather additional tax documents to claim specific types of credits and deductions. For example, you probably need to have a copy of Form 1098-T if you want to deduct college tuition with the lifetime learning credit.
Even if credits and deductions were changed or eliminated for future years, you can claim them if they were available for the tax return youâre claiming. Learn more about the difference between tax credits and deductions as well as the difference between different types of deductions.
Common documents you may need include:
Receipts from charitable donations for the charitable contributions deduction
Receipts for unreimbursed employee expenses, such as for travel or union dues
Moving expenses if you moved for a job
Documents showing the value of any casualty and theft losses, not including losses already covered by your homeowners insurance policy