I have received many phone calls from individuals who have not filed a tax return for years, and the reaction runs from terrified to overwhelming dismay. There are many reasons people don’t file a tax return, but today, I addressing the issue of filing returns when there are lost or non-existent records. Most taxpayers want to do the right thing (try buying a house, car or any other item on credit without having filed tax returns), but just don’t know where to start. The process for filing back tax returns without any records is fairly straightforward.
Here is how the process works:
1. The first step is to contact the IRS to determine what has been reported to them under your social security number. Any one that has given you a W-2, or a 1099 has reported that information to the IRS and they match it up with your social security number. There are a number of other items that would be reported to the IRS as well, and you could easily forget as the years go by without filing a return. If you haven’t filed a tax return, you will eventually receive a notice from the IRS (called a “matching notice”), because they know you received income, but haven’t filed a return.
2. You can “reverse engineer” your estimated taxable income by adding up your monthly living expenses – rent, mortgage payment, utilities, child care, car payment, gas, credit card payments, food, insurance – anything you pay each month to live. For instance, if your monthly expenses are $3,000, then it stands to reason that your yearly income must be somewhere close to $36,000 ($3,000 x 12).
3. If you have bank statements, what were your total deposits for the year?
4. Ask yourself, does this return make sense? Is it based on some sort of logic? The IRS knows how much it costs to live in each area of the country, and perform “lifestyle assessments” on returns being audited, where they believe income has been under reported. The tax return must reflect your living style and conditions over the period of time in which you are filing. If filing your returns results in taxes due, the IRS is very willing to work with you on a payment plan.
If you have any questions or concerns about filing a tax return without records, please give me a call or email me at firstname.lastname@example.org. I would be happy to discuss your situation and see how I can help.