I have clients frequently call and, shamefully, admit that they have not filed since 2007, 1997, 1994, etc. They often feel embarrassed or feel that they are the only person in the word that has this big secret. Often, they also think that catching up or the process of filing itself will be very difficult.
I don’t have any of my W2s! I ran my own business and no longer have the records! Furthermore, the banks that held my records do not even exist anymore! The vendors that I did business are also out of the picture! My spouse at the time had the records! My spouse at the time said they filed but we never did! Every single one of these scenarios is extremely common and very much able to be solved.
How do you reconcile such a seemingly tragic tax scenario? Very simple. If the records are missing, have your CPA fill out and fax form 4506-T. Within a few weeks she/he will have your entire transcript of information that your employer will expect to see on your late returns. Yes, that includes any 1099-DIV, 1099-INT, 1099-MISC, W2, etc.
How does the IRS have these records? Well, each reporting institution has the obligation to file the W2 not only to the employee, but to the IRS, as well. This is how the IRS finds out if your taxes are computed properly – they will compare the income reported by these institutions to what you are reporting on your return.
Once these records are obtained, the filing of the returns is a painless process. You should file the return even if you do not have the money to pay.
But how far back do I go? The general rule of thumb is 6 years. For some government jobs and other types of employment, your record must be squeaky-clean and I have had clients request older forms to be completed, but generally the furthest you need to go back is 6 years.