For how many years must I file back taxes

by Jamshed Gandi, CPA / CFP / CVA

I have not filed taxes in 10 years and want to file now. How many years must I go back?

I commend you for wanting to file for the years you missed. If you owe no taxes, you probably will have no problems with either the Internal Revenue Service (IRS) or the California Franchise Tax Board (FTB), assuming you reside in California. Be aware, however, that you will not receive refunds more than three years old. So, for example, if you filed all your returns for tax years 2002 through 2011 by April 15, 2013, you will only receive refunds for tax years 2009, 2010 and 2011. (Refunds for a tax year come in the following year. A refund for tax year 2009 would have come in 2010 if you had filed your 2009 taxes on time.)

Even if you believe you are due a refund, it is to your advantage to file your income tax return. If you don't file a return, the IRS may file a substitute return on your behalf based on the information reported to it by your employers, banks and stockbrokers. Such a filing likely will not include all your exemptions, credits and deductions. So the IRS might find that you owe taxes. The FTB also requires you to file if you meet certain income levels.

And if you owe taxes for any of the years you missed, you will be subject to a failure to file penalty, a failure to pay penalty and interest on each of those years. Therefore, you should file as early as possible for all the years you failed to file. Once you file, the IRS has up to 10 years to collect taxes, penalties and interest on the taxes you owe. The FTB has up to 20 years. If you don't file and owe taxes, the IRS and state have no time limit on collecting taxes, penalties and interest for each year you did not file.

If you owe back taxes, consult a qualified tax preparer such as a CPA as well as legal counsel. These professionals can help you find any deductions and credits that will reduce your overall tax bill. They can also negotiate with the IRS and FTB to set up a payment schedule you can reasonably meet. Tax laws change; so the quicker you attend to this matter, the better.

Jamshed Gandi, CPA / CFP / CVA, is a stockholder in the firm of RINA Accountancy Corp. in San Francisco. You can reach him at  (415) 777-4488(415) 777-4488 .

Have a question for a CPA. Ask it here.