If you’re behind on paying your taxes, the IRS offers a range of payment plans and settlement options, but unfortunately, the IRS will not negotiate a tax debt relief plan with you until you’re considered “compliant” and that means getting your unfiled returns caught up.
In this article, we will walk you through what “filing compliance” really means, how many years you’re typically expected to file, how the IRS handles missing returns, and how working with a tax attorney can save you time, money, and stress.
Key Takeaways
- The IRS won’t approve a payment plan, Offer in Compromise, or hardship status unless you’re up to date on recent returns.
- You don’t always have to file every single unfiled return, as the IRS typically applies the “6-Year Rule”.
- Voluntary filing can reduce penalties, preserve refunds, and protect against aggressive IRS collection.
- A tax professional can determine which years need filing, represent you with the IRS, and help start the process right away.
Do You Have to File All Past-Due Returns?
This is where many taxpayers breathe a (small) sigh of relief. You don’t always have to file every year you missed. This is where the IRS’s 6-Year Rule comes in.
According to the Internal Revenue Manual (IRM 1.2.14.1.18), the IRS generally only requires the past six years of tax returns to be filed. This is their standard policy for individuals looking to get back in compliance
There are some exceptions to the rule:
- Evidence of fraudulent or criminal tax behavior
- Large unpaid balances over multiple years
- Ongoing patterns of noncompliance even after prior enforcement actions.
A qualified tax professional can help review your unique situation and request that the IRS waive even more years if appropriate. Don’t try to determine this yourself. Every case is different, and overfiling is common without expert advice and guidance – remember, you want to get into compliance but you don’t want to do more than you have to.
What the IRS Requires Before They’ll Negotiate
Before the IRS will sit down at the negotiation table, they want one thing first: compliance.
What does compliance mean? In IRS terms, compliance means:
- All required returns are filed (usually the past six years).
- You are making estimated payments for the current year if self-employed
- Your withholdings are adjusted adequately if you have wages.
Basically, the IRS wants to see that you’re not just dealing with old issues, but you’re on track moving forward.
You must be in compliance if you want to set up any of these relief options:
- Installment Agreements (IAs) — Monthly payments on your debt
- Offers in Compromise (OICs) — Settling for less than you owe
- Currently Not Collectible status — Temporarily stopping collections due to financial hardship
Bottom line? Even if you can’t pay everything right now, filing first is non-negotiable.
Why You Should File Before the IRS Does It for You
If you take too long to file a tax return, the IRS may file one for you using a Substitute for Return (SFR). Typically, the IRS will send out a CP59 notice when they have not received a record of a prior year return. This gives you an opportunity to resolve your non-filing status. You then have a few options. You can file your return immediately or explain why you do not need to file a return at all. If you don’t need to file, you’ll send back a completed Form 15103 letting the IRS know the reason why filing didn’t need to happen.
On the other hand, if you ignore the CP59 notice, the IRS may file a “substitute return” on your behalf. They will use information from employers and financial institutions to determine your income, but may not give you credit for deductions and exemptions that you would normally take had you filed on your own.
Not only will the IRS make a decision on what your tax obligation should be, but you’ll also be subject to interest and penalties on a late return. Should a SFR be filed, you will be sent a notice of deficiency (90-day letter) with the proposed tax assessment, giving you time to either file or petition the SFR in Tax Court.
Put bluntly, an SFR will overstate your tax bill because it excludes everything you might be eligible for. Worse, it positions the IRS to take enforcement action, including:
Filing voluntarily, even if you are late doing so, could greatly reduce your tax liability. It also shows that you are trying to make amends for not filing in the first place.
Benefits of voluntarily filing:
- May reduce your tax liability
- Lets you claim missed deductions and credits
- Minimizes penalties compared to an IRS assessment
- Shows you’re taking action in good faith
- Starts the 10-year Statute of Limitations on tax collection.
How a Tax Relief Pro Can Help You Get Compliant
Trying to navigate this process alone is like rebuilding a house without blueprints. You could try to make sure that everything is where it is supposed to be, but it can be complicated to ensure you haven’t missed crucial details. It is possible, but also complicated, slow, and likely to cost you more in the long run.
A licensed tax attorney, CPA, or EA can:
- Pull your IRS transcripts to review your tax filing history and determine if anything is missing
- Determine which years truly need to be filed under the 6-Year Rule
- Help reconstruct income records and apply the correct deductions
- Prepare and submit accurate returns both quickly and efficiently
- File a Power of Attorney (Form 2848) to represent you before the IRS
- Establish breathing room by requesting a collections hold while your case is pending
Not only can a professional help you figure out what needs to be done to get you compliant with the IRS, they can also protect you from immediate enforcement while your case is being worked on. This is important if you have ignored previous communication from the IRS and you are in danger of having liens or escalated collections actions taking place.
A tax professional will talk to the IRS to prevent aggressive tactics to collect. Plus, professionals know when and how to ask for penalty relief, settlement eligibility, and will ensure every angle of your unique case is considered.
Why Filing Quickly Helps You Save Money
Delaying your return filings doesn’t just prolong your stress, it can hit your wallet in a serious way. Here’s how waiting to file will impact your finances:
- Penalties accumulate — Up to 25% of your tax due just from the failure-to-file penalty, plus up to another 25% for the late payment penalty.
- Interest keeps growing — It compounds daily and applies to the tax and penalties.
- You lose refunds — After three years, unclaimed refunds are gone for good.
- The IRS may file SFRs — Locking in excessive tax balances
- Missing documents vanish — Reconstructing old income and deduction records gets harder.
For example, if you haven’t filed since 2018 and you’re waiting until 2025 to act, your late filing penalties alone could be thousands of dollars. And that’s before you’ve even addressed what you actually owe.
Filing sooner lets you:
- Trigger the 10-year collections statute clock on IRS collections
- Secure eligibility for installment or settlement plans
- Reduce the total assessed debt
Benefits of Voluntary Filing vs. IRS Substitute Returns
| Situation | IRS Substitute Return (SFR) | Voluntary Filing |
|---|---|---|
| Uses the optimal filing status | ❌ | ✅ |
| Includes dependents or tax credits | ❌ | ✅ |
| Gives you control over reported income | ❌ | ✅ |
| Lets you claim business expenses | ❌ | ✅ |
| Likelihood of overstated taxes | ✅ | ❌ |
| Can help avoid enforcement actions | ❌ | ✅(if timely) |
| Starts 10-year collections clock | ❌(often delayed) | ✅(immediately) |
Final Thoughts: Filing Is the First Step Toward Relief
Falling behind on your taxes doesn’t mean you’re doomed, and it definitely doesn’t mean your situation is unfixable. But before there can be a plan, a deal, or a path forward, you have to file your back taxes. Even just starting the process shows the IRS that you’re ready to move forward.
With the right professional support, you may:
- Only need to file the most recent six years
- Lower your balance from IRS IRS-assessed estimates
- Unlock powerful options for setting up payment plans or resolving for less
- Avoid the most damaging enforcement actions
Don’t wait for the IRS to file for you — take control and get back into compliance now. Take the first step in resolving your tax debt by contacting W Tax Group to start moving forward toward financial peace of mind.
Frequently Asked Questions
Do I have to file every single year I missed?
Not necessarily. The IRS 6-Year Rule may allow you to file for only the past six years’ worth of filings.
What happens if I let the IRS file a return for me?
An IRS Substitute for Return (SFR) usually leaves out deductions, credits, and dependents, and inflates your tax bill. It can also trigger enforcement actions like liens or levies.
Can I negotiate a settlement before I get caught up on my filing?
No. The IRS won’t accept settlements or payment plans until you’re considered “compliant,” which includes filing all required returns.
I don’t have my old tax documents. Can I still file?
Yes. A tax professional can pull IRS transcripts and help reconstruct your income and deductions.
Can a tax pro really speak to the IRS for me?
Yes. Once you sign Form 4848 (Power of Attorney), a licensed CPS, EA, or tax attorney can fully represent you and communicate with the IRS on your behalf.
Sources:
https://www.irs.gov/newsroom/what-to-expect-after-receiving-a-non-filer-compliance-alert-notice-and-what-to-do-to-resolve
https://www.irs.gov/payments/failure-to-file-penalty
https://www.irs.gov/irm/part5/irm_05-014-001r#idm140342810245728
https://www.irs.gov/businesses/small-businesses-self-employed/irs-audits
