Most people who call me about old tax years start the conversation the same way: “I know I should have done this a long time ago.” Then there’s a pause, like they’re waiting for me to agree.
I don’t. Not because the returns don’t matter, but because guilt doesn’t fill out a single form. What helps is understanding what filing actually does for you, so you can decide what to do next with clear eyes.
I’m Izella Lui, a licensed Enrolled Agent, and some of my clients call me their Tax Relief Solver. I work by myself out of Daly City, with people across San Mateo County, San Francisco, and Alameda. I don’t have a team or an assistant, so when you reach out, I’m the one who answers and I’m the one who reads your file.
I’ve written before about how unfiled returns can lead to wage garnishment. That post is about what can happen if you wait. This one is the other side of the coin. It’s about what you may gain by filing past-due tax returns, including a few benefits I find most people have never heard about.
Key Takeaways:
If you and I were chatting over the fence on a gray Daly City afternoon, here’s what I’d want you to walk away with:
- You might be owed money. Before you assume the worst, let’s check whether any of those missing years have a refund waiting. Some of my clients have been pleasantly surprised.
- That refund clock is real. For a 2023 return, you generally have until April 2027. I’d hate for you to miss it by a few weeks.
- Your family belongs on your return. The IRS’s version doesn’t know about your kids or your expenses. Yours does.
- If you work for yourself, think about future you. Those filings can count toward your Social Security. I always bring this up with my self-employed neighbors.
- You probably don’t need to file every single year. Often it’s around six. Let me look before you start digging through the garage.
- Filing comes first, then options. I know it’s tempting to skip straight to “what can I do about the balance,” but the returns are what open those doors.
- I’ll tell you the truth, even if it’s the small answer. Staying true to my work matters more to me than making a job bigger than it needs to be.
First, What Counts as “Past Due”
A return is past due once its deadline passes and it hasn’t been filed, including any extension. For most people that’s April 15 for both the IRS and the California Franchise Tax Board (FTB). If you got an extension, the date moves to October 15. As I write this in October 2026, that means your 2025 return is now past due if it wasn’t filed by October 15.
Here’s something that surprises people. If you were owed a refund, the IRS generally doesn’t charge a penalty for filing late. You just can’t get that money until you file. If you owed tax, penalties and interest keep adding up month by month. Either way, the year doesn’t go away on its own.
Reason 1: You May Have Money Waiting for You
I’ll start with the one that makes people sit up in their chairs.
If your employer withheld more tax from your paychecks than you actually owed, you may be due a refund for that year. Same if you qualified for credits like the Earned Income Tax Credit, the Child Tax Credit, or California’s own CalEITC and Young Child Tax Credit. But a refund isn’t paid until a return is filed.
There’s a time limit, too. For federal returns, you generally have three years from the original due date to claim a refund. After that, the money typically goes to the U.S. Treasury and you can’t get it back. So if you never filed your 2023 return, you generally have until April 15, 2027, to claim any refund for that year. California generally gives you four years from the original due date.
I’ve had clients come in braced for bad news on four years, and it turned out that one or two of those years had refunds sitting there. Sometimes a refund from one year can even be applied toward a balance in another year. I can’t tell you whether that’s your situation until I see your numbers, but it’s worth checking before the clock runs out.
A quick note: the Bay Area has had disaster-related filing postponements in recent years, which can shift some of these dates. When I look at your file, I confirm the exact deadlines that apply to you.
Reason 2: Your Return Tells the Real Story
If you don’t file, the IRS may eventually file one for you. It’s called a Substitute for Return, and it’s built only from the income forms the IRS has on hand, like your W-2s and 1099s.
What it usually leaves out is everything that’s in your favor. Your spouse. Your kids. Your mortgage interest, if you itemize. The business expenses that went with your 1099 income. It often uses single filing status, too. The result tends to be a much larger balance than you’d likely owe if you filed yourself.
The FTB does something similar with its own estimated assessment based on information it receives.
Filing your own past-due return gives the agencies your actual facts. For a lot of households, that alone lowers the amount owed, sometimes by quite a bit. That’s not something I can promise ahead of time, but it’s one of the most common things I see when I prepare a past-due year with real numbers.
Reason 3: Starting the Clock
This one is a little technical, but it matters.
When you file a return, the IRS generally has three years to review it and assess more tax. When you don’t file, that three-year window never starts. The IRS can generally assess tax for an unfiled year at any time, even many years later. California works the same way. A Substitute for Return prepared by the IRS doesn’t count as you filing, so it doesn’t start the clock either.
In plain terms, a year with no return stays open indefinitely. Filing is how you give that year a finish line.
Reason 4: Your Social Security Record
This is the one that matters most to my self-employed clients, and almost nobody knows it.
If you work for yourself, whether you drive for a rideshare app, do contract work in tech, clean houses, cut hair, or run a small shop on Mission Street, your Social Security credits for those years are generally based on the self-employment income you report on your tax return. If you don’t file, that income may never make it onto your Social Security record.
There’s generally a window of three years, three months, and 15 days after the end of a tax year to get that self-employment income onto your record. Miss it, and those years could count for less (or nothing) toward your future retirement and disability benefits.
If this sounds like you, my post on self-employed unfiled taxes goes into more detail.
Reason 5: Penalties Grow While You Wait
If you owe for a year that isn’t filed, two separate penalties usually apply:
- Failure to file: generally about 5% of the unpaid tax for each month or part of a month the return is late, up to 25%. If a return is more than 60 days late, a minimum penalty applies.
- Failure to pay: generally about 0.5% per month on the unpaid balance.
The failure-to-file penalty is usually the bigger of the two by a wide margin. Filing the return, even if you can’t pay right away, generally keeps that larger penalty from continuing to grow. Interest still applies, but you’ve taken the steepest part out of the picture.
California has its own penalties, and if the FTB sends you a formal demand to file and you don’t respond, there can be an additional penalty on top.
Reason 6: Life Paperwork Often Needs Filed Returns
Taxes have a way of showing up in places you wouldn’t expect. Here are a few I see often around the Bay Area:
Buying or refinancing a home. Mortgage lenders commonly ask for tax transcripts. If a year is missing, the application can stall.
College financial aid. The FAFSA pulls tax information directly from the IRS. If parents haven’t filed, it can hold up a student’s aid.
Covered California. If you received help paying your health insurance premiums, you’re generally required to file a return and reconcile that help on Form 8962. Skipping that step may affect your eligibility for financial help in a later year.
Small business loans and leases. Lenders and some landlords ask for recent returns as proof of income.
Handling a loved one’s estate. If you’re taking care of a parent’s affairs, their unfiled years can come up too. I’ve written about a family member’s taxes after they pass if that’s where you are.
Reason 7: Filing Opens the Door to Your Options
This may be the most practical reason of all. Almost every IRS and FTB program people ask me about generally requires your filings to be current first. That includes:
- Installment agreements with the IRS, the FTB, or both.
- Currently Not Collectible status, for people whose income only covers basic living costs.
- Penalty relief, such as first-time abatement or reasonable-cause relief.
- An Offer in Compromise, for the smaller group of people whose finances meet the IRS’s strict criteria.
Without current returns, an application for most of these generally won’t move forward. With them, we can have an honest conversation about which, if any, you may qualify for. My post on back tax relief options Daly City residents may qualify for walks through each one. And not having filed at all sits at the top of my list of common mistakes with IRS back taxes.
“Do I Have to File Every Year I Missed?”
Not always. In many cases, the IRS generally asks for the last six years of returns to consider someone back in good standing. That’s a general policy, not a hard rule. Depending on your situation, the IRS may ask for more or fewer years. California may look at its own set of years, too.
So if you haven’t filed in nine or ten years, please don’t assume you’re facing a mountain of ten returns. Sometimes it’s fewer. Figuring out exactly which years are needed is part of my job, and the IRS has a helpful page on filing past due tax returns if you’d like to read their guidance directly. The FTB has a similar page about filing a past-due return.
How I Work Through It With You
Being true to my work means I take the time to understand your situation before I tell you anything. Here’s how it goes:
We talk first. No cost, no pressure. You tell me which years you think are missing and what letters you’ve received. Unopened envelopes are welcome. I’ve seen plenty.
I pull your records. With your written authorization, I request your IRS wage and income transcripts for each year. These show every W-2, 1099, and other form the IRS has on file for you, even the ones you’ve lost. I check your FTB account too. If you’d like to look on your own first, you can request transcripts through the IRS Get Transcript page.
We figure out which years are needed. Based on your transcripts, any letters, and the general six-year guideline, I’ll tell you which years I recommend filing first, and why.
I prepare each return with your real numbers. Federal and California, year by year. If you’re self-employed, we’ll rebuild your expenses together from bank statements and receipts. You don’t need a perfect shoebox. We work with what you have.
I tell you honestly what you may qualify for. Once the returns are done, we look at the actual balance, if there is one, and talk through your options. If the answer is a simple payment plan you could set up yourself online, I’ll tell you that.
If you’d like me to, I handle the correspondence. As an Enrolled Agent, I’m federally authorized to represent taxpayers before the IRS, and I follow IRS Circular 230. That means I won’t promise you an outcome. The IRS and the FTB make the final decisions. What I can promise is that I’ll read every page myself and explain it to you in plain English.
Frequently Asked Questions
I can’t pay what I owe. Should I still file? Yes, in most cases. Filing generally keeps the larger failure-to-file penalty from growing, and it’s the first step toward any payment options you may qualify for.
I lost my W-2s from a few years back. Can I still file? Usually, yes. With your authorization, I can pull your IRS wage and income transcripts, which list the income forms the IRS received for each year.
How far back can I still get a refund? Generally three years from the original due date for federal returns, and generally four years for California. Disaster postponements can change these dates, so I always confirm yours.
Will filing old returns get me in trouble? Most people who call me are dealing with a civil tax matter, not anything more serious. In my experience, coming forward on your own is generally viewed better than waiting for the agencies to reach out first. If your situation has unusual facts, I’ll tell you honestly and point you in the right direction.
Do I need to file California returns too? If you had California income and met the filing requirement, generally yes. The FTB runs its own process separately from the IRS, so I look at both.
How long does it take to catch up? It depends on how many years are needed and how organized your records are. Many clients are surprised at how much we can get done once the transcripts arrive.
Do you only work with people in Daly City? Daly City is home base, but I work with clients throughout San Mateo County, San Francisco, and Alameda.
If there’s a year or two sitting in the back of your mind, let’s take a look at it together and find out what’s actually there. It may be less than you fear, and it may even include a refund. I’m Izella Lui, a licensed EA working one-on-one with neighbors across Daly City, San Mateo County, San Francisco, and Alameda. Call me at 415-818-6899 or Book a conversation with me. If you’re still deciding, my earlier guide, Have Unfiled Tax Returns? Find Out Your Options, is a good next read. And once you’re caught up, here’s how to avoid IRS letters going forward.
Izella Lui, EA, is a licensed Enrolled Agent serving Daly City, San Mateo County, San Francisco, and Alameda. This article is general information only and isn’t tax advice for your specific situation. Deadlines, penalties, and eligibility for any IRS or FTB program depend on your individual facts, and the agencies make all final decisions.
