How to File Back Taxes

When it comes to filing taxes, it truly is a case of "better late than never." By filing prior year tax returns, you can pay penalties, catch up on late tax payments, and prevent interest from compounding further. Below are a few simple steps to help you file your back taxes and get caught up with the Internal Revenue Service.

Track down the paperwork
Depending upon how far back you need to file, you may have to do a little bit of legwork to track down the documentation for your income and deductions. If you no longer have your income paperwork and you're an employee, your employer's payroll department is usually the best place to retain another copy of a prior W-2. If you're self-employed, you will need to contact prior and current clients who may have records of 1099s they've sent you in the past. You can also send Form 4506-T to the IRS. This form is an official request for a transcript of W-2s, 1099s, and 1098s issued in your name and Social Security number going as far back as 10 years.

Even though you are filing late, you are still eligible for deductions and credits, but you need to make sure you have documentation, such as paid receipts, to prove your eligibility. As such, do your best to locate as much paperwork as possible from that year. Credit card and bank statements, which are usually available many years back, are often a good way to document expenses when the original receipt can no longer be found.

Download previous year's tax forms
Online tax preparation services like E-file.com, often provide links to tax documents from the previous three years of tax filing. For example you can find a number of prior year 1040 forms on this page. You can also find some past tax documentation on the IRS website.

Depending upon how far back you are attempting to file, the current year's filing instructions may not be applicable to previous years' tax forms. So, in addition to accessing the old forms, you may also want to look for the instructions from that year. With the right forms and instructions in hand, you can fill out your forms completely.

Send the forms and payment
Once you are prepared to mail your completed tax forms to the IRS, you'll want to include a payment. Calculating interest and penalties can often be difficult for an individual taxpayer. So, if you can't easily determine a payment that will cover the late tax penalty, interest, and any taxes you owed from this year, it is advised that you pay at least enough to cover the original tax bill and preferably an estimate for the interest and penalties. Once the back tax return is received and processed the IRS will notify you of any outstanding payment or possible refund.

For more on filing a prior year tax return click here.