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Old 04-03-2017, 09:57 PM   #1
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Haven't filed for past 3 years - Strategy for catching up

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I didn't file my taxes for the years 2013, 2014, 2015 and haven't yet for 2016.

I'd like to get caught up now, including 2016, but am wondering how to deal with reporting the refunds I'll be getting on 4 State 1099G Forms as income on my Federal return next year.

Had I filed each year, I would have gotten over-payment refunds for both State and Federal taxes for all 3 prior years, and would again for 2016. The State refunds would have been around $3000 for each year.

My income is about the same over the 4 years, rising maybe 2%-5% each year.

I'm trying to understand if there will be any difference financially if I just go ahead and file 2013, 2014, 2015 and 2016 returns all at once now in 2017, which would mean I'd get 4 1099G's I'd need to claim as $12,000 in additional income on my 2017 tax return.

Or would it be better for me to file 2014 and 2015 now in 2017, then file 2016 and 2017 in 2018, which would cause me to add $6000 to income on my 2016 return and $6000 to income on my 2017 return.

Or would there be no difference in the total amount of tax I'd pay or the amount of refund I'd end up with either way?

Any thoughts are appreciated.
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Old 04-04-2017, 03:00 AM   #2
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I am assuming that:

A) You are itemizing your deductions
B) You are taking the state income tax deduction as opposed to the sales tax deduction
C) The difference between the state income tax deduction and the sales tax deduction was less than the amount of the state refund
D) All of the amount of the state tax deduction was of benefit to you
E) You are not subject to AMT

If the tax rate on all of that taxable refund is the same in both years (in other words, if the additional 6k in 2017 doesnít cause you to jump in to the next tax bracket), it doesnít affect any phase out of credits or deductions, and it doesnít affect any additional Medicare tax, then the results may be no different recapturing it all in one year as opposed to two.

There may be other factors (capital gain or loss, previously unallowed losses freed up in a given year, allowed rental loss, etc.) that may weigh in to the analysis of the above.

There will be a difference, financially, if you donít file for the 2013 refund before 4/18/2017, or on some other date near this depending on what state you are dealing with.
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