Remember 2007?

Remember 2007? A snowstorm dumped eight and half feet of snow on Mexico. That’s Mexico, New York, in case you were wondering. Even then, it was one of the hottest years on record since, well, the beginning of record keeping. A tornado hit Manhattan in August, but that was picayune next to the Yankees losing the division to a tribe of Indians from Ohio. Sales of the iPhone launched that summer took off and haven’t returned to earth since. And, how could we forget, Lindsay checked into rehab, Paris went to jail, and Britney shaved it all off. Bet you couldn’t wait to be reminded of that, along with the fact that 2007 was also the year you didn’t file your taxes.

There are some common causes why people omit to file in any given year. It was a hectic time in their lives, marked by shaky relationships, shifts in residence or job, and they simply forgot. Or perhaps they found themselves with too little income and felt they could ill afford to pay any taxes they feared they might have owed to the government.

In fact, an ironclad case can be made why you should do the right thing and file a late return for 2007. For one, you could be due a tax refund, one you will forfeit if you fail to file by April 18th of this year, the date on which the statute of limitation for a refund for 2007 expires. But even if you owe, it is crucial to get it done. We’ll unpack some of the reasons when we review some of the key facts involved with past year returns.

Just over a million tax payers omitted to file a return in 2007. The IRS figures that it is sitting on above a billion dollars in owed refunds for that year, with more than half estimated to clock in at $640 or more per individual. The state of California alone is looking at a total potential jackpot of $127,000,000. These are impressive numbers, all representing moneys owed to the people, that the IRS stands to pocket if said people don’t come forward to claim what is rightly theirs.

So, it is advantageous to file, if only because you may come into some ready cash. Another excellent reason is that financial institutions, banks and the like look at your past returns when evaluating whether you qualify for a loan. Many discover to their dismay that it is their failure to file in any given year that caused their application for a mortgage, car or business loan to be rejected. Regardless of your particular situation, if you still have neglected to file a 2007 tax return, it is to your benefit to file one now.

But what if, as feared, you end up owing money to the taxman for that year? Note this: whatever the amount owed, it is highly probable that it will be substantially less than the figure the IRS will come to if left to its own devices. To understand why we must look at how the government assesses your tax liability for the year which you did not file. In short, it takes an educated guess based on a variety of factors such as past income, sends you a notice and, in the absence of a response, produces a substitute for return (SFR) whereby a tax return is filed on your behalf.

The reason, irrespective of any penalties incurred, you’re likely to end up with a greater liability is that this substitute return may not include any deductions and exemptions you would surely have taken if you had filed your own return. Nor will the IRS acknowledge any expenses involved in earning a living that year, resulting in a higher taxable income than would have been the case if you had been involved. And remember that any penalties and interest would be based on the taxman’s greater estimated amount and be accordingly more onerous.

The IRS calculates the failure to file penalty based on the period extending from the original deadline to the date the return is eventually filed. The fine is 5% of the amount owed for each month the return is late up to a total maximum penalty of 25%. The failure to pay penalty is also based on the amount due and is 0.5% for each month that the tax is not fully paid. Similarly, interest is itself calculated on the amount in arrears. While rates change every three months, underpayment interest rates for 2007 stand at 8%, among the highest of the decade.

Clearly, unless you’re prepared to live the rest of your life in hiding, it behooves you to file. Tax evasion is a serious offense, likely to end you in jail. To file past year tax, you should seek copies of your W2s, 1098s, and 1099s for that year. If it all sounds too overwhelming, you should consider obtaining the services of a qualified tax preparer such as PriorTax.com. For a low fee of $35 per annum, you’ll work with someone who has a special understanding of the various issues and possible pitfalls involved in filing late taxes. Although late taxes cannot be filed electronically, your preparer will make sure to forward you a printable copy that you’ll then be able to forward to the IRS by regular mail.

Fortunately, filing past year taxes is possible at any time of the year. Even more fortunately, most people who file back taxes find out they’re eligible for a refund! The important thing is to file taxes before that refund gets garnished by fines. Here’s our back taxes advice

The first thing to do is remember that filing past year taxes is exactly the same as filing any taxes. There are a few extra questions on the forms, sure, and it might take longer to get everything processed, but the heart of it is the same: W-2′s, 1099s, 1040EZ, etc. There’s no more challenging than any of other type of taxes, which means you should worry about the actual process of doing them just the same.

The second thing is to remember that the IRS wants your money, but they need you to get it. You may find out filing past year taxes that you owe money and that’s scary. With Failure to File Penalties and other fines, it can amount to a lot. But the IRS can’t take your money if you go bankrupt, so having you be able to pay them off is in their interests. That’s why suggesting and working towards a payment plan is a good idea. It gives them what they want (your money) and it gives you what you need (a reasonable way to pay it back). Win win.

The third thing to remember is that filing past year taxes is essential to your financial future Like any debt, having unpaid past taxes can reflect badly in credit scores and affect things like bank loans, mortgages, etc. The good news is as soon as you start filing past year taxes, that all starts to go away. You move away from the state of being in debt, to a state of repaying a debt, which is a much better place to be.

Lastly, don’t forget that you can file past taxes online and that a great number of Americans filing past year taxes will receive refunds. There’s no reason not to file today!

So what if you’re lost those old returns? How can you obtain past tax returns years after you filed them?

The first thing to do is to know what part of the past tax returns you absolutely need. While it’s helpful to have all of the return, sometimes you may only need a part of it, such as the W2 or the amount of refund received. How you obtain your past tax returns depends on what you need, so make sure to consider what you’re looking for. If you want help with filing, you may only need your refund amount (possibly obtained from bank records). If you want to use past taxes as a way to get discounts, you’ll need the whole return.

No matter what part of the return you’re looking for, you can contact the IRS and ask for it. They should have any old return on record and to obtain past tax returns all you need is the time to wait for them to send it to you. Unfortunately, due to backlog, this can take weeks, even months. If you don’t have the time to wait around, there are alternative means. For example, if you only need your W2 talk to your employer (or former employer) as they have to keep it on file for 3 years.

The easiest way to obtain past tax returns is if you e-filed your past taxes. With a single email to customer service, you should be able to get the whole return, free of charge. Most tax sites store the information on huge off-site servers, so provided you can still confirm the account, all you need to obtain past tax returns is a working email address. And if you use the same service year after year, your past tax information may be automatically stored in your account.

Of course, the best way to obtain past tax returns is to save them in the first place. If you file by hand, be sure and make a copy. And if you’re filing online, be sure and save a PDF and store it securely (or even print it out). Old tax returns are very useful and should be considered an essential part of any taxpayer’s financial toolkit.

Fortunately, filing your past taxes makes filing your current year taxes easier–and vice versa. So make this year the year you get all your taxes taken care of. Here’s how:

• Collect all documents. Every year you qualify to file taxes, you receive a W-2 form. Make sure that you have all of these, even your past taxes W-2′s together, before filing. If one is missing from your records, contact your employer or the IRS to receive a copy of it. Additionally, for this year’s taxes all employers have to legally give you your W-2 (or 1099 Reporting) form by the end of February. Make sure that they do!
• File your past taxes first. Once you have everything gathered together, file the oldest taxes first. That way you won’t be penalized when your new taxes are filed and you won’t lose any part of your refund. Back taxes are also a little more complex to file, so it’s important to take the time to do them right.Follow up. When you file two types of taxes at once–both past taxes and current taxes–it’s best to check to make sure the IRS knows that you have filed both types. Due to the way taxes are processed, it’s possible that your current taxes would get processed before your past taxes, which might lead to your refund being garnished. Besides tracking the documents to make sure that the back taxes get processed first, follow up. Don’t be afraid to call the IRS and ask questions, especially if you take the time to handle your taxes earlier in the year.
• Use an online filing service. Online filing is, without a doubt, the easiest and cheapest way to file your current taxes. It’s also the easiest way to file your past taxes! Both can be filed online, which saves you time and money and makes it a lot easier to see if the IRS has received things and when they have. So avoid IRS-induced headaches and file online this year.

Fortunately, it is. And as the new year approaches, the more it’s recommended. Once the new year approaches we will have ended another IRS fiscal year, which only increases your penalties and fines. So here’s the best way to file past year taxes returns now:

• Figure out what years you owe for. Before you file your past year taxes return, it’s a good idea to know which years to need to file for. If you’ve only missed one year of tax filing, this will be an easy step. But if you’ve missed multiple years, it’s a good idea to double check which years so you don’t spend time working on the wrong forms. You can do this by contacting the IRS, or checking your own records.
• Find out how much you owe. When you have failed to file past year taxes returns, you get hit with a Failure to File (FTF) penalty, as well as interest on the amount owed and other penalties. This means that your amount owed is often higher than the original amount. Knowing the amount owed can help you prepare for the paying the taxes, as well as give you the ability to bargain for a payment plan.It should also be noted that many, many taxpayers are actually owed money by the IRS. Which means that filing old taxes is nearly always to your benefit.
• Decide how to file your past year taxes return. Once you have decided it’s financially viable to file your old taxes, it’s important to have a mode of attack. You can file the forms by hand, but doing past tax forms can be a trying, lengthy process. You could also use the services of a tax preparer who’s skilled at doing past taxes, but it usually makes more financial sense to file with an online past tax preparer. Once you’ve figured out how to file your past year taxes return, the next step is a snap.
• Relax. Having tax issues can be a strain on anyone. But once you have dealt with them, it can be a huge relief. Having to file past year taxes return is a big job, but with e-tax services it can go fast–and the sooner it’s done, the sooner you can stop worrying and start living life again.

Savvy negotiators have used their past tax records to save 5%, 10%, even 25% on everything from mortgages to business loans to buying a new car. And you can to. Here’s how, in 3 easy steps:

• Save your past tax records for five years. Most people recommend keeping your financial information for only three years, but I disagree. I think keeping it five years allows you to be selective about which income years you can show. If you had one bad year 3 years ago, you can omit it as needed. Or, you can put it in the proper context, showing how consistent your income has been the rest of the time.
• Consider your debt. Past tax records are great tools, but they’re most effective when used with a savings plan. Spend some time thinking about your expenses, you debt, and where you can save money. Do you want a second mortgage on your house? Or to reduce the monthly payments you have now? Do you want a new car? Do you need to borrow money for a specialized degree? Your tax records can help you with all of these things, but have a plan or an idea first.
• Bring your past tax records with you to your negotiation. Your past tax records are there to show how reliable and unrisky you are, no matter what your credit record may show. They can’t overcome a poor credit rating, but with a middling one or a great one they can help convince people to slash your costs up to 25%! Since you have a plan in action, go into the meeting feeling confident. Even if you do have some risk, your records show a consistent ability to make money and steady payments, and that’s extremely valuable information for any lender.

Using past tax records to negotiate savings really is that simple. Not only are they useful for people who want to show a better financial record, they are great for people who have almost no credit associated with their name because they’ve never taken out a loan. So students, hang on to those taxes! They might just help you buy your first house.

That’s right: if you have past state tax returns to do, you might be missing out on getting your own money back. And if you owe money, you may not have any idea until they start repossessing your house. What’s a taxpayer to do? Here are some steps to take:

• Make sure you have past state tax returns to file. Even if your state sent you a letter, they could still have it very wrong. It’s always a good idea to verify when someone sends you a letter demanding money. Make sure it’s actually you who owes the money and make sure the letter actually came from your state IRS first.
• Find out what your state laws are. The rules for filing past state tax returns vary from state to state, so make sure you know yours! It could be that there is a statute of limitations past 5 years. It could be that you aren’t eligible for a refund after a year. The fines and interest involved also
• Request any relevant W-2 forms from your employer. If you do owe past state tax returns, you need the information to complete them. If you haven’t held on to your old W-2′s, you’ll need to request a copy from your employer or former employer before starting to fill out the old returns.
• Contact a tax preparer, if necessary. E-filing and online taxes has made it much easier for the average person to do regular tax returns these days. However, past state tax returns are a whole ‘nothing can of worms, varying because of state law, how much you owe (or how much if owed you), how past due the returns are, and so on. It can be a lot for a person to handle on their own, especially when it comes to negotiating payment. Using a tax preparer–even just an online service that specializes in past tax returns can be a lot of help when filing those past state tax returns. If you get fed up, consider bringing in reinforcements.
• Breathe. Having to deal with past state tax returns can be a big, long challenge. However, it’s one that is totally worth it for your financial future. It can improve your credit score, help get you out of debt, and even give you some money. So while you’re filing those returns, don’t forget to relax. You’re doing the right thing and it will be over soon.

And for those who do owe money? Well, there are plenty of good reasons to still file your past year taxes:

Just filing your past year taxes doesn’t mean that you are expected to pay the whole balance instantly. Instead, it accomplishes a few important goals:

• Starts the timer for the 10-year statue of limitations for past year taxes collection. This means it starts the process that help get you out of tax debt even if you can’t pay much.
• Failure to File Penalties are steep–5% a month and up to 25% of what you owe and you also get a Failure to Pay penalty. Filing past year taxes stops that interest and those penalties from accruing.
• Filing past year taxes shows good faith, which is important in any interest negotiations with the IRS. The more you show yourself to be a responsible citizen, the better the IRS will treat you and negotiations will go.
• Tax relief can’t even start if you have a Failure to File or Failure to Pay on your records. When you file past year taxes, you get rid of those flags and can get started on relief negotiation with the IRS.

By filing your past year taxes–even years after the fact–you demonstrates that this is a mi9stake you’re trying to correct. The IRS doesn’t expect you to give them the balance of your debt. Instead, because they want your money, they are often surprisingly accommodating.

Additionally, if you only think you’d have debt, I highly suggest you file as soon as possible. The majority of people who have failed to file past year taxes are owed money. By not filing past year taxes, all you’re doing is letting the IRS take penalties of out your money and reducing the amount they have to give you.

The sooner you file those old, past year taxes you’ve let sit the sooner you can move on with debt or get the refund you’re owed. So find a reputable prior tax service and get started today!

How can copies of your past income tax forms accomplish all that? Here’s how:

Pay stubs are useful to hang on to for at least a year because they show a record of what you made. Likewise, receipts should be held onto until you get a bank statement showing those expenses, because they show you how much you’re losing. Copies of your past income tax forms, however, show both expenses and income for the whole of the last year. They are a nearly complete financial record.

Because they are so complete, they are extremely valuable to people who give out money professionally, like banks. When banks can see where your money went, where it’s coming from, and how accurately the government is gauging your taxes (which includes net worth), they can get a better sense of how much of a risk you actually are.

And risk, after all, is what keeps people from loaning money to you. Unfortunately, oftentimes when you look your financial worst is when you need money the most. If you’re going through a hard financial time, you’re less likely to be given the tools you need to get out of it. However, copies of past income tax forms can minimize the effects of your temporary financial hardship. They show a clear financial record that documents your average income, your business expenditures, and even what you were making a few years ago. Copies of past income tax forms can help establish how unrisky you are–and help you get the loan you need!

Copies of past income tax forms are also invaluable negotiation tools if you already have good credit and little risk associated with you. Using those old forms, you can show how reliable you are–and help knock down the prince!

So hang onto your past tax forms, because you never know when they’ll come in handy!