Now that the past year is winding down, and with next year’s tax season just ahead, there’s no better time to think about catching up on your past year tax filings.There is no good time to have tax troubles, but this year and next year could be particularly bad times. In the past, many economic crises have been accompanied by tax code changes that take years to be fully understood, so expect a busy tax season after a rough year. Rather than worry about your past tax payments later on, this is the the time to handle them.
In general, it’s a good idea to pay your past year tax as soon as possible. When you owe tax money, the amount you need to pay grows at over 12% per year. But that growth can be drastically slowed down if you’re careful. Just by scheduling payment of your past tax liability with the IRS, you can reduce that interest rate to 4% per year.
You might worry about paying more money for your past income, but there’s good news on that front: most people who pay their tax late end up owing less than average, and are more likely to get a tax refund. So you could have a healthy refund check lurking in your past — the only way to find out is to deal with your tax issue as soon as possible.
Sadly, past taxes are a little harder to deal with than regular tax payments. You’ll need a special tax form for the year of your tax payment, and you’ll also need to file extra information to tell the IRS that the form is meant to apply to a past year. Even worse, you can’t file your tax forms online for past years.
Filing past taxes is surprisingly easy – you can even do it online!
Fortunately, there’s a way around this. With a little help, it’s easy to fill out your tax form online. You’ll want to pick out a good tax help provider, which is a difficult process. What you want to do is make sure you have the advantages of a small tax preparer (attention to detail, continuity between past and current representatives) and a larger provider (extensive service, many years of experience). The best combination is to find a boutique provider focusing on past year tax issues — many of these providers offer their tax services mostly online.
To actually fill out your past year’s tax forms, you’ll need to follow some simple steps.
First, gather all of the information you can from the year in question. That includes past bank account statements, brokerage reports, and, of course, any tax forms from that past year you can find.
Next, ask the IRS for any available information. If you can get tax forms for the year before and year after the past year you’re paying for, you’ll be able to make more reasonable statements on the tax forms.
Finally, select a good tax service provider to help put all your tax information together. Most tax preparers must pass rigorous certification tests, so you’re almost guaranteed to have someone who knows an astonishing amount about the issues you’re dealing with. Turning to a specialist can help save time, can help you spot tricky issues you might miss with a less experienced professional, and can be cheaper than a more general tax preparer because of the focus on a single area of tax preparation.
After this, it’s quite easy to finish up your past year tax filing. With the help of an experienced tax professional, it’s mostly a matter of filling in the blanks and keeping everything consistent. Filing your past taxes might seem daunting at first, but if you understand the process and have the professional tax help you need, it couldn’t be easier.
Photo via Matt Callow on Flickr.
