Ask the tax adviser
I haven't filed taxes in 10 years ...?
Dear Tax Talk:
I haven't filed in about 10 years or so, and
I want to file now and get it straightened out. What should I do?
I have always worked for cash and didn't start keeping good records
until last year. I have no W-2s or anything.
The Internal Revenue Service certainly would like to get you
back on board, but getting there is not easy. Understand that there
is no right answer to your question, but not filing and not paying
is certainly against the rules.
Technically, the IRS could request that you file tax
returns for all the years that you have not filed. I've seen the
IRS satisfied with the last three years to five years of tax returns.
When faced with a nonfiler with poor records, the
IRS generally attempts to reconstruct your income based on your
expenditures. For example, if you spend $2,500 a month on living
expenses such as rent, food, utilities, transportation, etc., the
IRS would assume that you earned at least $30,000 a year. If you
also managed to buy a house and save money, the IRS will count the
down payment and the savings as additional income.
If some of your living expenses were paid by loans
or gifts, both of which are not taxable, you'll need to gather enough
credible evidence to reduce your income by these items. Since you've
you can offset some of your income with business deductions that
may have been counted in the $2,500 I used as an example. Even though
you're filing late, you're still entitled to claim legitimate deductions.
Your best bet in getting back on the tax rolls
is to meet with a professional
who can represent your case to the IRS. I have always found
that the IRS is tougher on the taxpayer who represents himself than
they would be if he had representation. The money that it will cost
you to hire a professional will be saved in taxes and angst.
-- Posted: May 2, 2002