Filing several years of missing tax returns can feel like finally getting a weight off your shoulders. But submitting the returns is usually not the end of the tax problem. In many cases, it is the point where you finally learn what the problem actually looks like.
Some years may show balances due. Another year might show a refund. If the IRS previously created a Substitute for Return, that account may need to be adjusted. And once the missing returns are processed, the IRS may begin or resume collection on any unpaid taxes.
Here is what you may expect next.
The IRS Processes Each Missing Tax Year
When several past-due returns are filed, each tax year has to be processed and reflected on your IRS account. The result will not necessarily be the same for every year.
One return might show that you owe several thousand dollars, while another could show little or no balance. Preparing the actual returns replaces some of the uncertainty that comes with years of not knowing how much you owe.
If taxes remain unpaid, interest and applicable penalties can continue to increase until the balance is paid. Filing the missing returns stops the returns from remaining unfiled, but it does not automatically remove the amounts owed.
What If the IRS Already Filed a Substitute for Return?
Some taxpayers discover that the IRS has already calculated tax for one or more missing years through a Substitute for Return, commonly called an SFR.
An SFR is based largely on income information the IRS has received from employers, banks, and other third parties. It may not include deductions, credits, or other information that could reduce the taxpayer’s actual liability.
Filing your own accurate return can still make a difference. The IRS states that it will generally adjust the account to reflect the correct figures after a taxpayer files their own return following an SFR.
That adjustment could change the amount you owe, but it does not necessarily mean the balance disappears.
You May Start Receiving Balance-Due Notices
Once the missing returns are processed and taxes are assessed, the focus can shift from filing compliance to collection.
That change can be uncomfortable. You may have spent months concentrating on getting the returns completed only to begin receiving notices showing tax, penalties, and interest.
Still, you are in a different position than you were when the returns were missing. You now have actual numbers to work with.
If the balance is not paid, the IRS collection process can eventually include notices, a federal tax lien, or levy action. An IRS-created SFR that results in an unpaid assessment can also lead to collection activity.
Filing the Returns Can Open the Door to Resolution Options
One of the biggest reasons to get the missing returns filed is that IRS resolution options generally require you to be current with your filing obligations.
Once the necessary returns are filed, you may be in a better position to address the balance through a payment arrangement or another collection alternative.
If you cannot pay everything at once, an installment agreement may allow you to make monthly payments. Depending on your financial circumstances, other possibilities may include an offer in compromise or a different collection resolution. Eligibility varies, and simply filing the returns does not guarantee approval.
The next question becomes less about “How do I catch up?” and more about “What is the best way to deal with what I owe?”
Do Not Forget About Current Taxes
Catching up on five years of returns will not help much if another unfiled return is added the following year.
After dealing with the backlog, staying current becomes part of keeping the problem from starting over. That may mean filing future returns on time, adjusting paycheck withholding, making estimated tax payments, or keeping up with payroll tax deposits for a business.
Current compliance can also matter when seeking or keeping an IRS payment arrangement.
Final Thoughts
Filing years of missing returns is a big step. For many people, it is also the point where the situation finally becomes clear.
You may find that some years are manageable while others carry larger balances, penalties, or interest. If the IRS previously filed a Substitute for Return, those figures may also change once your own returns are processed. The important thing is that you are no longer dealing with unknowns.
From there, the focus shifts to what you can do about the remaining tax debt.
The Law Office of Steven N. Klitzner can review the results of your filed returns, address issues involving prior IRS assessments, and help you determine what resolution options may be available. If you have already taken the step of getting your missing returns filed, the next step is figuring out how to move forward from there.
Steven N. Klitzner, P.A. is a tax attorney based in Miami, Florida. He has been practicing tax law for over 40 years, and currently holds a 10.0 rating by Avvo. Mr. Klitzner was appointed to the IRS Service Advisory Council in 2021 and is... 
