Filing Multiple Year Tax Returns In Canada
If youre behind filing your returns, you shouldnt simply walk into your nearest popular income tax chain with your collection of returns. Once you are behind on filing your taxes, you should deal with professionals who have a high level of experience that can negotiate with the CRA for you to achieve compliance.
Late tax-filing should be approached carefully. When filing past tax returns, the Canada Revenue Agency has a process that you should follow and helpful programs that may make it easier to follow their process.
The Voluntary Disclosure Program was designed to be used as a second chance for people who did not file taxes accurately or when they should have.
If your application is accepted to the VDP, the CRA could grant you relief from prosecution and even reduce the interest or eliminate the penalties that you will be required to pay. This can be a great incentive for taxpayers who are interested in filing past tax returns in Canada.
Its important to note that your disclosure must be voluntary, which means that you will need to come forward before the CRA contacts you about filing taxes late.
You will also need to provide complete and accurate information during your disclosure.
Finally, you must also include the full payment of the tax debt owing, including any interest not waived by the VDP.
Whatever your solution, its crucial to act quickly and file your back taxes so that you receive your tax benefits and arent faced with any future penalties.
How Can I File My Back Tax Returns I Have No Records
Our Firm often encounters individuals and businesses who have not filed income tax returns for many years. Oftentimes, someone went through a traumatic event, such as the death of a spouse, and did not file a tax return for that year. Or business owners may have had a dispute, and one owner may have taken all of the records, making it difficult for the other owner to file a tax return.
However, the consequences for a pattern of unfiled returns can be severe. They can include penalties, interest, and even jail time for willful failure to file a tax return. The IRS has a complex computerized system that can find out if you have not filed a tax return especially if others have reported paying income to you. The IRS can file a substitute-for-return using the income reported to them on Forms W-2 or 1099, and they will not allow any deductions for business expenses, exemptions or itemized deductions. This can result in an astronomical tax bill.
Fortunately, it is possible to prepare tax returns for prior years even if you no longer have documents to support your expenses. The IRS will normally accept tax returns based on reasonable estimates. Its own internal manuals recommend using Bizstats.com in audits when accurate records are not available. Bizstats.com provides business financial ratios classified by type of entity, industry and amount of gross receipts, which can be used to estimate expenses.
Keep An Eye On Your Income
You need to file a tax return if you meet or surpass certain levels of income during the year. If youre employed, look at your pay stub for the year to date incomeand if you have more than one job, be sure to add up your income from all your employers. Remember to include income from other sources, too, such as money you make on rental property, anything you sell, investments or interest.
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Why Should You Work With An Enrolled Agent At Bc Tax
An enrolled agent must pass a three-part exam. This exam evaluates the agents ability to understand individual and business tax returns. An alternative way to qualify for the status of an enrolled agent is by working directly for the IRS. Regardless, an enrolled agent needs to stick to strict ethical standards and meet requirements for ongoing continuing education.
The benefits of choosing BC Tax for our tax debt services include:
- Comprehensive knowledge: Partnering with BC Tax also allows you to avoid challenges in communication. We never outsource to a third party who doesnt understand the IRS. Though we are a Denver-area business, we thoroughly understand how all state and federal taxes work.
- Expert guidance: A tax professional at BC Tax can resolve issues and answer your questions. If you have unfiled returns, you likely have questions about your tax situation, and an experienced tax professional can provide you with the answers you need.
- Flexible hours: When you work with one of our enrolled agents, you wont have to worry about time zones. You can communicate with your enrolled agent when its most convenient for you.
- Face-to-face interaction: We also understand how helpful it can be to meet with your enrolled agent and tax relief team in person. If you prefer to meet with us in person, you can visit our offices by scheduling an appointment to speak with our team.
How Do I Apply For An Itin
If you want to file a tax return but cannot obtain a valid SSN, you must complete IRS Form W-7, Application for IRS Individual Taxpayer Identification Number. Form W-7 must be submitted to the IRS with a completed tax return and documents verifying identity and foreign status. You will need original documents or certified copies from the issuing agencies. The instructions for Form W-7 describe which documents are acceptable.
Parents or guardians may complete and sign a Form W-7 for a dependent under age 18 if the dependent is unable to do so, and must check the parent or guardians box in the signature area of the application. Dependents age 18 and older and spouses must complete and sign their own Forms W-7.
You can use this checklist to help prepare your application.
There are three ways you can complete the ITIN application:
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Save The Right Paperwork All Year Long
Stay on top of tax-related paperwork throughout the year it will make your life easier during tax season. You might want to keep receipts for things like charitable donations, work-related expenses and medical bills, or other items from step 4. You may also want to keep statements from student loans or investments and any grants or fellowships. Having these handy and organized can help you determine whether to itemize and make the process easier. You should keep your paperwork after you file, too. The IRS recommends keeping records for at least three years.
How To File Unfiled Tax Returns
In most cases, if you didnt file a previous years tax return, you can do it retroactively. Although often more cumbersome, you can prepare and submit most state tax returns late.
There are many consequences to not filing federal and state tax returns when you are required or you have a balance owed. The consequences vary based on how long since you last filed taxes. In most cases, filing a tax return is usually in your best interests. Here are the steps to file back taxes or deal with unfiled returns.
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How Far Back Can You Go To File Taxes In Canada
According to the CRA, a taxpayer has 10 years from the end of a calendar year to file an income tax return. The longer you go without filing taxes, the higher the penalties and potential prison term.
Whether you are late by one year, five years, or even ten years, it is crucial that you file immediately. You may think that since you dont have the money to pay your taxes, its best to not file, but this isnt the right move.
The CRA does not forget about you over time. Every day that goes can cost you more money in late-filing penalties, interest, and other potential fees when you delay filing your taxes.
Notices For Past Due Tax Returns
You may receive one or more of the below notices if you have not filed your tax return.
If the IRS files a substitute return, it is still in your best interest to file your own return to take advantage of all the exemptions, credits and deductions to which you are entitled. The IRS will generally adjust your account to reflect the correct figures.
Understanding Your CP2566R NoticeWe previously sent you a CP63 notice informing you we are holding your refund until we receive one or more unfiled tax returns. Because we received no reply to our previous notice, we have calculated your tax, penalty and interest based on wages and other income reported to us by employers, financial institutions and others.
Understanding Your CP3219A Notice We received information that is different from what you reported on your tax return. This may result in an increase or decrease in your tax. The notice explains how the amount was calculated and how you can challenge it in U.S Tax Court.
Understanding Your LT3219B Notice This Statutory Notice of Deficiency notifies you of our intent to assess a tax deficiency and of your right to petition the U.S. Tax Court to dispute the proposed adjustments. We made these adjustments because we received information from third parties that doesnt match the information you reported on your return.
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Dig Into Past Emails And Paper Records
Finally, youâll want to look for any additional records you can come across. Any scrap of information could prove useful, whether itâs a big shoebox of receipts labeled âkeepersâ or invoices and receipts archived in your email inbox.
If youâre a service-based business, things like appointment books, order forms for supplies, and other unconventional records may be used to substantiate business expenses and income.
Ultimately, your goal is to identify as many revenue and expense transactions as possible using one or a combination of these three main sources. Take care to avoid duplicating transactions on your tax records if you have them both on a bank statement and another receipt, invoice, or data source.
Tip: To avoid this challenge in the future, hire a bookkeeper or bookkeeping service so your records are always updated monthly. With updated accounting records, you can have tax-ready financials with just a few clicks.
How Long Does It Take To Get Into An Irs Collection Agreement
Millions of taxpayers each year cannot pay their taxes. In 2019, there were 16.8 million individual taxpayers who owed the IRS. Each year, between 4-5 million taxpayers have to get an installment agreement, extension to pay, or another more complicated IRS collection alternative to full payment.
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Filing A Late Tax Return With A Refund Due
If you have not filed your tax return, and you are entitled to a refund, did you know that the deadline for you to claim the refund is 3 years from its due date ? For example, if you were due a refund on your 2013 Income Tax Return , you have until April 15th 2017 to claim it. If you dont file a claim for a refund within three years, the money becomes property of the U.S. Treasury.
Note, there are no interest and penalties for failing to file a return in which a refund was owed. However, if you have a balance due, those items can be pretty stiff as outlined in this post.
Here are some of the facts you need to know about filing a late tax return in which there is an unclaimed refund:
This post here will provide the instructions on how to file the return either via paper or using an authorized E-File provider. If you would like us to assist you, give us a call or visit the main page of our site. We have the software to file tax returns going all the way back to 2004 so were sure we can help you out with any of your old returns.
How To File Tax Returns For Previous Years
Filing a tax return for a previous year isn’t as hard as you may think, but it does require a few steps.
1. Gather information
The first step is gathering any information from the year you want to file a tax return for. Pull together your W-2s, 1099s, and information for any deductions or credits you may qualify for. Look on the tax forms you gather for the year of the tax return you’re filing to make sure you use the right ones.
2. Request tax documents from the IRS
Finding documents from previous years may be challenging for some. Thankfully, the IRS has a form you can fill out to request any tax information they have on file for you for a given year. Form 4506-T allows you to request a transcript of your tax return information, even if you haven’t filed a tax return. You can request information from the last 10 tax years.
The IRS will send the information it has on record, including information found on forms such as W-2s, 1099s, and 1098s. It won’t have information about deductions and credits you may qualify for, though, so you’ll still need to do some work on your own.
3. Complete and file your tax return
Once you have all the forms you need, be sure to use the tax forms from the year you’re filing. For instance, you must use 2018 tax return forms to file a 2018 tax return. You can find these documents on the IRS website. Patience is important when filling out a tax return by hand. And thankfully, you can also file tax returns from previous years using TurboTax.
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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
They include:
- 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.
Credit For Other Dependents
A $500 non-refundable credit is available for families with qualifying relatives. This includes children over 17 and children with an ITIN who otherwise qualify for the CTC. Additionally, qualifying relatives who are considered a dependent for tax purposes , can be claimed for this credit. Since this credit is non-refundable, it can only help reduce taxes owed. If you are eligible for both this credit and the CTC, this will be applied first to lower your taxable income.
Being able to claim a dependent may also allow people who are unmarried to claim the Head of Household filing status. Claiming Head of Household as your filing status may reduce the amount of income taxes owed.
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Penalties That Otherwise Apply
Without the program, a plan sponsor faces many potential late filing penalties, including:
- $250 per day, up to $150,000 for each late Form 5500 or 5500-EZ, plus interest ) as amended by section 403 of the Setting Every Community Up for Retirement Enhancement Act of 2019 .
- $1,000 for each late actuarial report
What Is An Enrolled Tax Agent
Enrolled agent status is the highest credential with the IRS. An enrolled agent can represent taxpayers with approval from the IRS, and working with an enrolled agent will be a powerful resource for you.
Our enrolled agents at BC Tax can help you:
- Stop collection efforts.
- File accurate and updated returns.
- Negotiate an offer in compromise.
- Appeal enforced collection actions.
- Help you avoid asset seizure and wage garnishment.
- Review previous returns and resubmit if there are inaccuracies.
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What To Do If You Cant Afford To Pay Back Taxes
Because of the potential for interest, the IRS advises you to pay your tax bill in full as soon as possible.
If you owe less than $100,000 and cant pay right away but will be able to soon, you may want to pursue a short-term payment plan. Short-term payment plans can buy you an extra 180 days and dont cost anything to set up online. You can apply using the Online Payment Agreement tool at IRS.gov or call 800-829-1040.
If youre unable to pay that quickly, there are other options.
Request an installment agreement
If you cant afford to cover your unpaid taxes, you can request an installment agreement by filling out Form 9465 . Fees start at $31 but vary based on your income level, how much you owe, how you pay and how you set up the long-term payment plan.
Request an offer in compromise
If paying your bill would be a serious financial hardship, you might consider an offer in compromise, which is essentially a settlement with the IRS for less than your total bill. The IRS warns that this program is not for everyone given its restrictions and rigor. Fees depend on your income but start at $205 .
You can apply for an offer in compromise, or OIC, by completing Form 656. Lacy says its a good idea to hire a tax professional if youre planning to pursue an OIC because its a lengthy process, and it does take diligence.
