For the year that I’ve been in been in practice (in fact, today is my one year anniversary!), particularly after I posted In Praise of the Screw-Up Client last summer, a large portion of my client base is people who have gone a while without filing tax returns. While that is always a suboptimal position for a taxpayer to be in, it’s not always for the same reason. When clients dealing with this come to me, they are always worried about owing a ton of money (very possible) or “going to jail” (pretty dang unlikely). But after I sit down with them and talk about their situation, another scenario often emerges.
What if the IRS owes you money?
If you’re a 1099 worker who hasn’t filed because you didn’t make your estimated tax payments, this is not you (still -you’re a good person! I can help you!). But if you’re Average Joe/Jane/Jxe who gets a W-2 and hasn’t filed because life got in the way, there’s a good chance you have a refund coming. That form you fill out when you start a new job is designed to withhold too much tax because IRS has learned the hard way that it’s easier to get your money up front than it is to chase you for it later.
Now, it doesn’t take a CPA to figure out that the IRS can’t charge interest and failure-to-pay penalties on a tax debt that doesn’t exist. But what a lot of people don’t know is they can’t charge you a late filing penalty either. That’s right. If you file a late return and you’re owed a refund, you get the whole refund back. Of course, IRS won’t pay you interest - even though they charge interest if you owe tax – but that’s a different blog for a different time.
Speaking of one-sided rules that work in the government’s favor… if you owe tax, the three-year statute of limitations for the IRS to come get it doesn’t start running until you file your return. However, if you are owed a refund, the statute starts running immediately. Cool, right? What that means is you only have a certain window of time to catch up on filing old returns and claim a refund.
So, how far back can you go? Glad you asked!
The three-year statute starts the day the tax return was originally due. Your 2014 tax return was due April 15, 2015 which means your window closes April 15, 2018. You have a little over two months to get that return filed. I hope you’ll find the time to dig through your stuff and make that happen. But if life is still getting in the way, you still have another year before the 2015 refund window closes, and so on.
As always, if you have questions about this or any other tax / accounting / personal finance concerns, please reach out.
Good luck. Get paid.