How can I file back tax returns when I’m missing receipts, checks and documents?

Yes. You are not required to be 100% accurate. You are not required to have every document, receipt, check and paycheck. These are myths.

Start by asking businesses you worked for if they can send you copies of a 1099 or W-2. If they don’t have those records, contact the IRS at 1 800 829 1040 and request a computer printout with the income information from the years you did not file. The printout will show the minimum amount of income you must report on your tax return.

Another method to reconstruct income is by IRS Form 4852, Substitute W-2. Attach it to the front of your tax return when you file. For missing 1099 income data, make your best estimate. There is no separate form for estimating 1099 payments.

Bank account records may be available as well, but be careful so you don’t report loans, gifts, and sale of assets as income. As time passes, people forget the sources of payments and deposits. For example, I had a client who made a capital contribution to his business from another one of his businesses. The IRS claimed it was income. It was not income. We submitted a simple affidavit to put a stop the Agent’s foolishness.   

As far as expenses, the IRS permits good faith estimates. You can recreate expense habits even if direct records are inadequate. The IRS allows deductions to be reasonably recreated and estimated. For example, for business use of automobiles, determine how many miles were driven in a year and what percentage was for business. Calendars can be referenced to recreate a log of business trips. If a prior-year return was filed based on actual records, it can serve as a reference point to determine a range of expenses for other returns where records are missing or incomplete.

When you’re ready to file, have your tax professional file at an IRS walk-in center. Do not mail the returns. Bring an extra copy of each return and have each return file stamped as proof of filing.  It can take several months to process the returns. If you owe money, you can utilize the tax forgiveness solutions outlined in the free book, How to Get Tax Forgiveness.