Haven't filed in years? The order of operations that keeps you out of trouble

First, find out what the IRS knows

A power of attorney lets us pull your wage and income transcripts for every year. This shows what was reported to the IRS, whether the IRS has already filed a substitute return for you, and what balance it thinks you owe. You plan from facts, not fear.

How many years

The IRS generally requires the last six years to be considered compliant. Older years may or may not be worth filing; it depends on whether tax is owed and whether a substitute return exists.

Substitute returns

When you do not file, the IRS may file for you using only the income it knows about — no deductions, no basis, filing status single. The resulting balance is usually far too high. Filing the real return replaces it.

File all years, then talk about the balance

The IRS will not grant a payment plan or consider an offer until every required return is filed. Filing first, negotiating second is not optional; it is the rule.

Penalties

Failure to file is 5% per month up to 25%; failure to pay is 0.5% per month. First-time abatement removes the penalties for one year if you were clean for the prior three. Reasonable cause — illness, disaster, reliance on a preparer — can remove more.

Resolving the balance

Installment agreements are automatic below certain thresholds and negotiable above them. Currently-not-collectible status pauses collection when income barely covers expenses. Offers in compromise settle for less when the IRS's own formula says it could never collect the full amount. Most people end with a plan; a few qualify for an offer.

The timeline

Transcripts in a week, returns in three to six weeks depending on records, resolution in one to three months. During that time, with a representative on file, collection activity generally pauses.

This article is general information, not advice for your situation. Facts and thresholds change; confirm before acting.