Filing Older Returns

[Christian]

A client has come in with three years of unfiled returns. These are for 2019, 2020, and 2021. it's quite clear she will owe tax for each and every year plus heaven knows whatever penalties and interest the Service will compute. I have no experience with filing unfiled prior year returns and have been trying to find some provision in law that can abate or lessen what I suspect is coming. Can any of you suggest anything I perhaps can do to help this person ? 

[Randall]

You can always request a waiver of penalties.  I don't think IRS can waive interest though.  You will need to talk to the client and get the circumstances.  I usually compose the letter, but it is addressed to IRS from the client.  And the client signs and mails.  When IRS opens their efiling system, you can efile current year and two prior years.  The earlier years will have to be paper filed.  

[BrewOne]

https://www.irs.gov/payments/administrative-penalty-relief

 

[Lynn EA USTCP in Louisiana]

when efiling opens in January 2025 the 2022 2023 and 2024 returns may be efiled.  All older years must be paper/mailed.

 

[Catherine]

The older (pre-2022) returns will have to be mailed, yes. However the client will be able to pay online using Direct Pay (or send a check for payment of tax with the mailed-in return(s)) thereby at least cutting off additional penalties and interest.

First Time Penalty Abatement may be possible for the oldest year (if the requirements are met; those are available online), but the penalties have to be imposed first. You can't ask for abatement before they add in penalties. Other penalty abatement might be possible if your client has a super-strong reason she could not file for those years. Sole caretaker of someone who needs 24/7 care might be a reason. Being someone who had a serious health event and was in hospital and/or rehab for a long time (or recurring visits in close proximity - I got penalty abatements for two years for one client who was in the hospital weekly for chemo, for months, spent the rest of the week recovering from that, then back in) is another reason. But they do check those out carefully and you do need to send in substantiation. Again, only after they impose penalties.

[Randall]

Even though first time penalty abatement may be only for the first year, try to lump the years together and claim that it is the first time.  This worked for me (one of my clients) several years ago.  The IRS originally only abated the first year but after a second letter (which I composed) they abated the penalties for all years.  It is worth a try.

[michaelmars]

Get paid up front plus an extra retainer to deal with the penalties etc.  Once they get the bills from IRS, your payments go on the back burner.