How many years of back tax returns need to be filed with the IRS or NCDOR? Perhaps it’s been a while since you last filed a tax returns with the IRS or North Carolina Department of Revenue (NCDOR) and now you want to get back into tax compliance. You may be happy to know that there is a limit on how many years a person needs to go back. In most cases, you only need to file the last six (6) years of returns in order to be considered back in compliance and eligible for tax relief. In some special cases, you only need to file the last three (3) years of returns if you need to file back tax returns in North Carolina. It is expected that the IRS and NCDOR will be pursing more non-filers who will be required to file several years of back taxes due to recent advances in data matching capabilities and reporting.
Should I File All Back Tax Returns?
There are some reasons to file additional years although most people are only required to go back the last 6 years for the IRS and the last 3 to 6 years for the North Carolina Department of Revenue. The most common reason to file back tax returns beyond that required is to reduce outstanding liabilities related to back taxes. In some cases, when a person fails to voluntarily file a tax return the IRS and North Carolina Department of Revenue will create a return on behalf of person (called a Substitute for Return). Substitute for Return filings often result in a higher balance than what would have been owed if a person filed the return on their own. Going back beyond the 6 years to file a return on a year for which a Substitute for Return has been filed can lower or even eliminate back taxes owed granting immediate tax debt relief. Another common reason for filing federal tax returns beyond the 6 year requirement is to obtain more favorable credits for Social Security purposes.
Settle Tax Debt by Filing Back Tax Returns
Filing multiple years of tax returns may result in a large amount owed especially once interest and penalties are added. In cases where the amount owed cannot be paid in full at once it may be necessary to set up payment plans via IRS or North Carolina installment agreements. Other options to settle tax debt include filing an Offer-in-Compromise which will require you to pay a lesser amount. These options will help prevent enforced collection actions such as wage garnishment and bank levies (aka clearing of banking accounts). However, eligibility for the aforementioned options mandate that you have filed the required back tax returns to be granted tax relief.
In closing, you generally only need to go back six (6) years to file back tax returns in order to get back into tax compliance. However, you are allowed to file additional years if you wish. However, all required back tax returns must be filed in order to settle tax debt and to qualify for other tax relief options.
About the Author:
Lauren Massie, CPA, EA, MBA resides in Raleigh, North Carolina. The primary focus of her CPA practice is income tax representation for individuals who need tax help with the IRS or the North Carolina Department of Revenue. She regularly assists clients with issues such as unfiled tax returns, back taxes, wage garnishments, bank levies, installment agreements, and the filing of an Offer in Compromise to settle tax debts. Have questions? Lauren can be reached directly at (919) 792-8511 or through this link.
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Lauren Massie
Lauren Massie, CPA, PLLC
8480 Honeycutt Road, Suite 200
Raleigh, NC 27615
(919) 792-8511
Lauren Massie, CPA, PLLC is based in Raleigh, North Carolina and serves clients throughout the Greater Triangle Area including cities such as Wake Forest, Durham, Cary, Chapel Hill, Morrisville, Holly Springs, Fuquay-Varina, Clayton, Louisburg, Knightdale, Zebulon, Rolesville, Wendell, Hillsborough, Youngsville, Franklinton, Garner, Zebulon, Henderson, Franklinton, Holly Springs, Creedmoor, and Angier.