Tax News Blog

Once you’ve paid your taxes, you might want to wave them a fond goodbye. But it’s never that easy. Since your taxes are a link between what you say you’ve made and what your employers say they’ve paid you, your past year tax forms are often an easy way for you to prove how much money you earn. And because that’s so convenient, you’ll often find that renting an apartment or leasing a car involves trotting out those past year tax returns.

But what about people who owe past year tax money to the IRS? They’re in a different situation entirely. Instead of being able to show someone a simple document that demonstrates how they’re doing, they have two issues:

1. It’s harder to prove an income, making it harder to get a lease.
2. Owing past year tax money might make a lender reluctant. They’d have to get in line behind the IRS.

Here are a few tips for dealing with this past year tax situation: Read the rest of this entry »

To start with, here’s what you must know about a possible refund. First, if your return qualifies for a refund there is no penalty for filing late. Second, if you do get a refund, remember that any amount gained will be held by the IRS if you omitted to file either of your 2008 or 2009 returns. Furthermore, it would also be applied to any amount if any still owed from these two years, and be used to offset any unpaid child support or student loans.

But what if, as feared, you end up owing money to the taxman for that year? Note this: whatever the amount owed, it is highly probable that it will be substantially less than the figure the IRS will come to if left to its own devices. To understand why we must look at how the government assesses your tax liability for the year which you did not file. In short, it takes an educated guess based on a variety of factors such as past income, sends you a notice and, in the absence of a response, produces a substitute for return (SFR) whereby a tax return is filed on your behalf.

The reason, irrespective of any penalties incurred, you’re likely to end up with a greater liability is that this substitute return may not include any deductions and exemptions you would surely have taken if you had filed your own return. Nor will the IRS acknowledge any expenses involved in earning a living that year, resulting in a higher taxable income than would have been the case if you had been involved. And remember that any penalties and interest would be based on the taxman’s greater estimated amount and be accordingly more onerous.

The IRS calculates the failure to file penalty based on the period extending from the original deadline to the date the return is eventually filed. The fine is 5% of the amount owed for each month the return is late up to a total maximum penalty of 25%. The failure to pay penalty is also based on the amount due and is 0.5% for each month that the tax is not fully paid. Similarly, interest is itself calculated on the amount in arrears. While rates change every three months, underpayment interest rates for 2007 stand at 8%, among the highest of the decade.
Read the rest of this entry »

In their lifetimes, many Americans will find themselves in this situation: receiving a letter from the IRS telling them they owe past tax. The truth is, we all forget things, including tax deadlines. Or, we’re not aware we qualify to file for taxes. Whatever the reason, it’s important to know how to file past tax returns–because it’s not as scary as you might think.

Here are some ways on how to file those past returns and get out of tax debt as soon as possible!:

• Use an online service. An online past tax preparation (such as this one) are a great place to start when you need to learn how to file past tax returns. An online filing service tends to have faster turnaround than any other method, and can also conveniently be done in one’s pajamas or late at night.
• Pay for a tax preparer. Tax preparers are well-versed in the intricacies of tax law, and so are a good resource to go to when you’re having tax issues. And if you want to learn how to file past tax returns with your specific issues, they can be the best place to turn. Unfortunately, they can also be the most expensive option and so are best to turn to only if your issues need a lot of help. Read the rest of this entry »

Knowing how to file past tax returns is a skill that can help you in a lot of ways. It keeps you from falling further into debt. It helps you keep track of your financial history. It can save you money or bills. It can make filing this years return go a lot faster.

But can knowing how to file past tax returns cancel out what you owed last year?

In a word?: Maybe.

It depends how we define the idea of cancel. If we say that cancel means the IRS looks at your past tax returns, see that they were filed, and literally erases any debt then, no. Knowing how to file your past tax returns won’t save you from any past due tax debt (though it will vastly reduce any debt you have!) Read the rest of this entry »

Even if you haven’t been nominated for a cabinet position, your past year tax issues can be a big problem later on. For many people, there’s a rush to finish taxes as April 15th approaches, followed by the realization that there just won’t be enough time to file.

Some manage to file an extension, and some pay a few days late, but for other people, the IRS issue recedes into the distance. It’s easier to just forget about the whole thing — and it gets easier every time a day passes without an angry letter from the IRS.

But those past year tax issues won’t go away, for a variety of reasons:

• The IRS will investigate when they have information about someone who hasn’t paid some of the taxes they appear to owe. It can take a while (right after April 15th, they’re pretty busy, but during the rest of the year, they have lots of time). Read the rest of this entry »

How many times have you just forgotten to do something? With all out responsibilities, it’s easy to lose track of some of them. Maybe you didn’t write down that doctor’s appointment. Maybe you were an hour late to a dance recital. Maybe you forgot to pay past year taxes. The last one is more common than you think–and is also the most detrimental the longer you wait.

Fortunately, you can still file past year taxes. And even more fortunately, you’re still eligible for a refund! In fact, most people who haven’t paid their old taxes are due a refund. Here’s why:

For some of us, forgetting to file past year taxes is just a slip of the mind. It might have been that we forgot to file an extension or were out of the country or a dozen of other viable reasons. For more people, though, not filing those past tax returns is part of a larger issue, because many of us are poorly educated about taxes.

A lot of people aren’t aware that even if you have no job, or ocassional jobs, or were laid off, you should still file your past year taxes. They–logically–think that making as little money as they did, it’s not worth the time and energy it would take to fill out the paperwork. Read the rest of this entry »

Credit scores are something that gets a lot of people in trouble. They get into credit card debt and find out it’s hard to get a house later on in life. Other people with no debt have trouble getting a loan because they don’t have enough of a proven track record. Throw in all other types of financial obligations–like student loans, debit cards, checks, savings accounts, etc.–and you can see how it gets confusing fast. But since I know about taxes, something I get asked a lot is if past years taxes affect your credit score. And, if so, how much.

And, of course, the answer is: it’s complicated.

Past years taxes do have an effect on your credit score. Pretty much any financial obligation you’ve ever had does. Credit scores are, roughly, a measure of good you are at getting money and paying it back. Taxes are a good way to measure how good you are at paying what you owe.

That said, if you’re Regular Joe Tax Payer, chances are your past years taxes won’t have that big of an impact. Part of this is because it’s hard for credit agencies to get data on your taxes from the government. What information they can get is how you spend your refund, how you pay off what you owe, and so on. As long as you’re filing your taxes on time, you probably won’t see a huge impact on your credit score. For the average person, taxes act pretty neutrally on your credit score. Read the rest of this entry »

Copies of past income tax forms are one of the most valuable and most overlooked financial documents out there. While bank statements, student loan debt payment records, and saving accounts can show you how much money you have, your past tax returns create a financial record that shows where your money has been and how you earned it. Not only that, but they can help you save up to 20 percent on home mortgages, car loans, and more!

How can copies of your past income tax forms accomplish all that? Here’s how:

Pay stubs are useful to hang on to for at least a year because they show a record of what you made. Likewise, receipts should be held onto until you get a bank statement showing those expenses, because they show you how much you’re losing. Copies of your past income tax forms, however, show both expenses and income for the whole of the last year. They are a nearly complete financial record.

Because they are so complete, they are extremely valuable to people who give out money professionally, like banks. When banks can see where your money went, where it’s coming from, and how accurately the government is gauging your taxes (which includes net worth), they can get a better sense of how much of a risk you actually are. Read the rest of this entry »

If you’re getting ready to file taxes for this year, one of the most helpful things you can do is have a copy of your past tax records on hand while you’re filing. Not only can it save you time doing your taxes this year, but it can also save you money throughout the year. Past tax information is one of the best ways to show a proven financial track record, and banks and other lenders treat them very seriously. Unfortunately, we have a tendency to throw them away or never save them to begin with.

So what if you’re lost those old returns? How can you obtain past tax returns years after you filed them?

The first thing to do is to know what part of the past tax returns you absolutely need. While it’s helpful to have all of the return, sometimes you may only need a part of it, such as the W2 or the amount of refund received. How you obtain your past tax returns depends on what you need, so make sure to consider what you’re looking for. If you want help with filing, you may only need your refund amount (possibly obtained from bank records). If you want to use past taxes as a way to get discounts, you’ll need the whole return.

No matter what part of the return you’re looking for, you can contact the IRS and ask for it. They should have any old return on record and to obtain past tax returns all you need is the time to wait for them to send it to you. Unfortunately, due to backlog, this can take weeks, even months. If you don’t have the time to wait around, there are alternative means. For example, if you only need your W2 talk to your employer (or former employer) as they have to keep it on file for 3 years. Read the rest of this entry »

“If you can fool the IRS, I might as well let you fool me.”
-Anonymous

Whenever you borrow lots of money, enter a new lease, or possibly need a general credit check, someone is likely to ask you for your tax return for previous years. Why? Because tax returns for past years offer a wealth of information on what your income has been, what assets you’ve owned, and how stable your job history is.

And in other cases, you’ll want those returns to help you file past year tax returns. When you file a past year tax return, you’ll need to use information from previous and subsequent years to fill in the gaps. Filing a past year’s tax returns is tedious (which is why there are more sites out there that file for you than that tell you how to file past years tax returns).

So how to you get those older forms? It depends on what you actually need! In most cases, you don’t need to literally get past tax returns — what you actually need is the information you entered. Sadly, just sticking with your best recollection would defeat the purpose. Read the rest of this entry »