Paying taxes is part of your responsibility when you earn a wage. When you don’t file taxes on time for any reason, you need to follow through with the proper process. Learning how to file back taxes starts with clarifying the process and ensuring you have the right documentation.
Learn How to File Back Taxes and Avoid the Penalties
What are Back Taxes?
Back taxes are the taxes you pay late. If you didn’t pay your taxes on time, then you must file back taxes. The government allows you to file the taxes late, but you must pay a penalty. Whether you want to file 2014 taxes online or are planning to file taxes for a different year, you must follow the appropriate laws.
Costs of Paying Your Taxes Late
When you pay your taxes late, you can expect a penalty. The cost depends on the length of the delay. The first step is determining the late payment penalty. It usually costs a percentage of the late taxes. Each month, the cost adds up to a maximum of 25 percent of your total tax responsibility for the year.
You can also have additional costs for a late payment penalty. That is usually 0.5 percent each month you don’t pay. The maximum is 25 percent of your tax responsibility. The total costs depend on the amount of time, so you can expect up to 50 percent added to your tax responsibilities in penalties and fees.
Gathering Your Documents
Do not ignore your back taxes. Even if you file the taxes late, you can limit your costs and penalties. It also ensures you don’t face legal consequences from your back taxes. Follow these steps so you can learn how to file back taxes properly from here on out.
The first step in filling back taxes is gathering your documents. Obtain a copy of your W2 forms for the year or a 1099 form if you work as an independent contractor. Gather all relevant documents for every place of work in the year you plan to file back taxes.
When you are filing taxes years late, you may want to use a software program like Turbo Tax to limit potential complications. The online software allows you to fill in the information and quickly file your taxes. If the government owes you money, then you may receive a refund after subtracting any fees and penalties. Alternatively, you may owe the government a set tax amount.
Filing the Paperwork
Fill out Form 1040 with Turbo Tax online or a similar tool. An online tool allows you to fill in the information without wasting time. Follow the instructions and fill out each page. You can also work with a professional.
When you finish filling out the paperwork, double check the information. Make sure you fill in the lines accurately according to your W2 and 1099 forms. If you don’t have the documents, then you can request a transcript from the IRS. Expect the transcript to take a few weeks to arrive, and use the transcript to fill in your data.
File the paperwork. You can send the documents through the mail or you can send them online. Do not forget to file the paperwork for your state when filing your back taxes. Turbo Tax and other programs may offer an option for state taxes as well as federal taxes.
Paying the Taxes
The final step in the process is paying your taxes. You can pay the entire amount at one time or negotiate a payment plan with the IRS. If you choose to negotiate a payment plan, then you may want to call the IRS to discuss your options. The payment plan will add interest or the cost of penalties for your payment. Paying the full amount upfront allows you to finish the process without further complications.
Looking for more info on how to file back taxes? Watch this video from Evan Hutcheson, CPA, LLC for step by step instructions on filling out Form 1040!
Paying your back taxes starts with the proper steps. You need to gather documents and fill out Form 1040. You can also use online tools and software to simplify the process. After you file the paperwork, you have to pay the amount you owe and the accrued penalties or interest.
Do you prefer to file your taxes online or in person? Share your thoughts and experiences with us in the comment section below!
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