What If I Haven’t Filed Taxes in Years? with Kevin Cross

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Request your copy of the Wisdom Over Wealth study with your gift of $35 or more by going to faithpi.com/slash give. Did you hear about the guy who tried to pay his taxes with a smile? Unfortunately for him, the IRS still prefers cash. I'm Rob West. All jokes aside, failing to file your taxes for several years is no small matter, but it's not the end of the road either.

Kevin Cross joins us today with practical steps to help you get back on track. And then it's on to your calls at 800-525-7000. That's 800-525-7000. This is Faith in Finance: biblical wisdom for your financial decisions.

Well, my good friend Kevin Cross is a seasoned CPA who's helped countless people navigate their finances and a good many of them who have fallen behind. Kevin, great to have you back.

Well, it's good to be back, especially on today's topic. Yeah, absolutely. We get so many questions on this. For someone who hasn't filed taxes in years and feels completely overwhelmed, where do they start? Yeah, the further you go behind, the more difficult it is to catch up.

So what I suggest is that we come into compliance the past year.

Okay.

So say you haven't filed for 10 years. Let's just file 24. We go ahead and figure out where you're at.

So, we're not showing the IRS that we're not going to file, that we just had a hiccup in our life. Yes. I think that's really key. And so, that may be news to some folks because the idea that I wouldn't go back to the first year I didn't file, but I'd get this year in compliance as a first step may be a new thought. What causes people to fall behind on their taxes, and how common is this?

Sometimes to the gig workers, they're getting at 1099 for the first time, and all of a sudden they went online, turbo-tax, and they found out they owe. Thousands of dollars, and they say something must be wrong. And all of a sudden, next year happens, and the following year. Or sometimes people get divorced, death, disability, some type of maybe separation from the job. Maybe a lot of people, since COVID, Have been struggling with filing tax returns.

Yeah. Let's clear up an often misunderstood idea, and that is you always have to pay if you owe something, but you don't technically have to file if you don't owe anything. Is that right? That's correct. And you don't get penalized if you're going to get a refund back.

So, you know, the April 15th deadline, you can file an extension to extend the actual. Filing of your return, but not the payment of any liability. If you have money coming back, you can file anytime up to three years later, or then you lose that refund.

Okay.

But just to be clear, there is a difference between not filing and not paying what you owe. That's correct. That is correct.

Sometimes you don't know you don't owe until you file.

So there's some senior citizens who contact me, say, Hey, do I need to file? I take a look at their work and they, no, there's not going to be any liability. You don't have to file. All right. If somebody's only income is their Social Security, can you just say automatically you don't have to file or not necessarily?

Absolutely. If that's the only source of income, I would say 100% of the time they do not have to file a tax return. All right. But as you said, a lot of times, and especially with the rise of gig workers, that's where this can really be problematic, right? Right, right.

Or some interest or dividends or some type of sale, a sale of a home. My goodness, that triggers. And if they don't file, and there's a wonderful opportunity for them not to pay capital gains on a sale of a primary rent. Residents, but if they don't show it to the IRS, they end up getting a letter from the IRS saying you owe several thousands of dollars. All right, let's get real practical.

What steps should someone take if they're ready to get started? Is there a recommended order or approach? Yes. Okay, so usually it's like, I'm not sure how many years behind I am. I haven't filed for a while, or I'm three years behind.

Well, they can go online. To the IRS and get a wage and income transcript. Wage and income transcript. They can Google it and go right to the IRS website. They can download it.

At least they'll know what the IRS has on record for them.

Okay.

All their W-2s, all the 109Is, 1098s for their mortgage interest, things of that nature, 1099Rs from their retirement. They've got all that on there, Social Security.

So you might need to start right there. Yeah, that's really helpful.

Now, do you recommend having somebody walking with you, a CPA or tax professional? Yeah, you can download your wage and income transcripts all you want, but you may not know what to do with them once you get them. They don't look like regular forms. You definitely need somebody who is savvy in the area of representation to help you to walk with you. And so there's people out there that haven't filed for years.

Where do they start?

Well, the internal revenue manual, it's like the IRS handbook. They say, we're only going to go back six years.

So don't start with 2000's return and try to file that. Let's go back. And then Often, I get a conference with the IRS and I say, hey, what do we got to do with this taxpayer? That's so helpful, Kevin.

Well, we've just scratched the surface on this. We're going to have to have you back and continue the conversation.

So thankful for you, my friend. It's good to be here. Folks, the IRS will work with you. They can do an offer and compromise or a payment plan.

So get started today. Back with your questions after this. Stick around. FaithFi is grateful for support from OneAssent. OneAcent believes that your values inspire why you invest and how they can inspire how you invest.

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We've got some lines open right now that won't last long, but you can call right now: 800-525-7,000. Again, 800-525-7,000. As we look at what's happening in the news today, never any shortage of things going on, giving your child a down payment can ease their path to home ownership, especially in today's high-cost market. But before you gift the money, it's wise to understand the options and tax implications.

Now, you can either send the funds directly to the title company or to your child. The first option requires a simple gift letter stating the money doesn't need to be repaid. The second involves more paperwork, including proof of funds transfer.

Now, Why do they want that letter? And this we get a lot of questions about. You see, the mortgage company that's determining whether or not to extend the mortgage and they're going through the underwriting process, they want to know that you've got some assets to put into the deal, that you have some skin in the game, so to speak, and that normally comes by way of the down payment.

Well, if you're out there borrowing money personally from a friend or a family member that's expecting to be repaid back, well, they want to know that. That's different than a gift where you're not intended to repay it.

So you might have a parent, like in this case that we're talking about today, that gives a gift to help with the down payment. There's no expectation of repayment.

Well, they want that parent to say that in writing and say, yeah, this is a free and clear gift, no expectation. If, though, that person was expecting it to pay back, well, that's going to factor into their decision as to whether or not they want to extend the loan. The size of your gift matters. Keep in mind. You know, in 2025, you can gift up to $19,000 per person.

So that'd be $38,000 to a single individual if you were a married couple. And that doesn't trigger any gift taxes.

However, the IRS does want to know about it if you are going to get up above that $19,000 threshold. You would need to let them know that by way of IRS Gift Tax Form 709, because that's going to start to chip away at your lifetime exemption of more than $13 million.

So, again, no taxes owed, but it is important to note that you are going to have to keep the IRS in the loop.

Now, here's what I would also say when it comes to helping an adult child or a child who's just getting started buy a home. Just be careful. I understand the desire to help and bless your child. Nothing wrong with that. You have the financial means to do it.

You want to bless the child with a gift to help them get into that home. Great. Just make sure that in the process. Of you trying to help, you're not setting them up for failure. And here's what I mean: if you're going to help them get into a home they really can't afford long term, you've not done them any favors.

So, another approach, and that's all it is, you may want to make that direct gift and let them use it for the down payment. But another approach would be to say, you know what? You guys save. Maybe it's going to take a little longer than you thought. You might need to delay.

There's a lot of we can learn in that process of waiting, delayed gratification, living within our means, saving diligently. You all do that. And then when you get that 20% down payment and you can buy that house you can actually afford because the payment fits well within your budget.

Well, we're going to come in at that point and help you pay down that mortgage. We're going to give you a gift that's going to allow you to pay it down even quicker.

Well, what have you done by doing that?

Well, you've helped them to learn the benefits of the financial discipline that came as a result of you being able to. Have them save on their own, you know, prepare for that home purchase, perhaps waiting longer than they expected. And especially right now with homes costing more and interest rates being higher, all of that goes into, I think, learning some things from that, but you're still blessing them by saying, Yeah, you know, that $200,000 mortgage, that $25,000 gift, we're going to help you put it right against that principle, which is going to save you a fortune in the long run.

Now, you may decide to give that to them on the front end so they can get into that home and not pay that interest at all on the, you know, on the front end and actually get that down payment that they need so they can do it quicker. I'm just saying, let's think and pray it through and make sure that you can actually, you know, set them up for success with that home that will ultimately be the one that fits their needs. I just want you to be really thoughtful about it. You know, we could apply the same thing in other scenarios, like, you know, a child. Child who's living at home, an adult child who's wanting to get out on their own, you know, maybe you say, listen, I want you to start paying rent here.

And maybe you're taking, you know, that rent money and sticking it off into savings so that when they're ready to launch on their own, ready to stand on their own two feet, you say, remember all that money you've been paying over these last couple of years?

Well, we've been putting in a savings account.

Now we want to give it back and bless you with it. Just some thoughts, you know, for you to consider that could go a long way toward you teaching the right behaviors, helping them shape kind of their own financial disciplines and being ready to kind of live into their kind of adult financial lives on their own without you, you know, stepping in and allowing them to short-circuit that process, if you will. Unfortunately, there's not a right or wrong answer here. And so really, it is something we just use great discernment with. We make it a matter of prayer.

You know, we have open and honest communication, and you know, if you're married, you and your wife need to be on the same page, or you and your husband, and make sure that you have complete unity with regard to how you're going about, you know, helping that adult child. Because if one of you has a red flag on that and says, you know what, I just don't think this is the right time, or I don't think our adult child is going to learn the lessons that God, you know, is trying to teach them right now, maybe we should hold back. I would say that's a cause for not proceeding for sure. You all need absolute unity before you step in and help that adult child.

So, hopefully, that's helpful for you today as you think about blessing your kids, setting them up for success, but not short-circuiting the process of whatever the Lord might be trying to teach them. Let's go down to Ocala, Florida. Hi, bunny. How can I serve you? Hi, my husband had a TIAA that he took out when he was a adjunct professor at the local community college.

It's just a small amount. And because I'm 76, I've been having to require to take a certain amount out each year. I would like to give this to my son now.

so that those amounts can stay in there and start accruing interest. Can I do that? No, unfortunately, you would not be able to do that.

So, you inherited this because you were the beneficiary on that account, and that's now your account. And you can't just transfer it as a retirement account to someone else, even a family member. What you would have to do would be to take the full amount out, which would all be taxable. It would be a taxable distribution.

So, you'd probably, if you did that, want to withhold the portion of the proceeds when they write you a check to be able to pay the tax bill. And then you could make a gift to your son of that amount, but you wouldn't be able to give him the retirement account without taking the money out as a taxable distribution. Does that make sense? Yes, yeah.

Okay.

Now you could name him as your beneficiary so that if you passed away, he would get it as an inheritance and then he would have to continue to take the money out over time on a scheduled basis. But in terms of you being alive, the only way to get it to him would be to take it out, pay the taxes and then hand the money over to it. Right, thank you. He is already my beneficiary.

Okay, very good. Yeah, excellent.

Well, thank you for calling, bunny. All the best to you. Hey, much more to come just around the corner. We're just getting cranked up here. We still have a whole nother segment left and some great calls coming up just around the corner.

We'll get to those here right after this break. If you want to check out prior broadcasts or download the FaithFi app, do that on our website, faithfy.com. We'll be right back. Are you looking for a financial professional who shares your Christian values and offers advice you can trust? Certified Kingdom Advisors are experienced financial, legal, and accounting professionals who have completed a rigorous certification program rooted in biblical financial wisdom.

They meet high standards of integrity, competence, and stewardship, helping you honor God with all He's entrusted to you. To find a Certified Kingdom Advisor in your area, visit FaithFi.com and click Find a Professional. We are grateful for support from the Eventide Center for Faith and Investing. ECFI is an educational initiative of Eventide Asset Management that seeks to help Christians understand and practice biblically faithful investing. They do this through their podcast and online journal featuring articles from industry thought leaders and their course called Discover God's Story for Investing.

More information is available at faithandinvesting.com. That's faithandinvesting.com. Thanks for joining us today. I'm Faith and Finance. We're taking your calls and questions today.

If you've got a question, we'd love to hear from you. 800-525-7000. You can call right now. Let's head to Indiana. Hi, Ann.

Thanks for your call today. How can I help? Hi, I am Just so grateful for you taking my call, and we appreciate your program so much. Thank you. I wanted to ask you about how we can work to pay off.

Our credit card because the balance is fifteen thousand. Usually, and we run about 11% interest. It's been that way for a long time. I have not asked for that to be reduced, but that's occurred to me lately to ask for that. The card is through a credit union.

And while we're trying really hard not to put expenses on that, We also have one of our daughters who is 29 and lives and works in London, England. We subsidize her a little bit with the expenses she has of living over there. And she has a card, her own credit card from our account. We gave her that several years ago because of emergencies or buying plane tickets home. And she's putting some expenses on that every month.

So if I try to pay $2,000 a month on that card or more, But the balance just goes right back up. And so we are really wanting to pay it off. It's been going on like this for way more than. The years that she's had her own card on it, and we just are at a loss of what else to do. Yeah.

Well, a couple of things going on here. Let's start with that latter issue first. It sounds like she has a bit of a blank check.

Now, I'm not saying she's just kind of running wild, but at the same time, it seems like we've moved beyond emergencies and plane tickets home.

So, what is you know, starting with you and your husband, as you think about your own finances and what you want to subsidize, I mean, is she on a budget? And can you all afford to continue to do this? And what guardrails do you have about her spending?

Well, it's a good question. Yes, there are guardrails, and we talk to her just about every month. As a reminder, I photo her the bill so she can see all of the expenses that are on it that are hers. She knows it's supposed to be for flights home which is only once a year, sometimes twice, but usually once. We've approved of that.

My husband says, yes, you can do that for when you want to come home. She is on her own really good budget there. We do subsidize, not by credit card, but we do subsidize her living expenses a little bit over there because it's expensive. But as far as the expenses that hit that card from her, it may be an occasional Uber, it may be.

some travel other than coming home, which she is Her travels, she loves to travel and she does it pretty often, those are all supposed to hit her, and she knows that. But some of them creep into ours.

Well, it seems to me like we need to change kind of the arrangement here. I mean, I would much prefer you guys decide how much you want to subsidize and then just do an automatic transfer to her checking account every month for that amount, put it into your budget, plan on it, count on it, but not have kind of this open-ended, you know, whenever she decides she wants to charge something, she does, and mom and dad are going to come through for me. Because you have to almost think about it. Not only is it dangerous for you guys in terms of your own financial life, I think it's really dangerous for her because we're not teaching her or reinforcing the right behaviors and the right disciplines around sound money management. You're reinforcing this idea that she really can spend beyond her means because, you know, mom and dad are going to backfill anything I can't afford.

So I really don't have to think about, well, I'd really like to go on this trip next month.

So I'm not going to go anywhere this month because I don't have the money to do it. And I'm going to save and then I'm going to, you know, pay for it out of cash. And, you know what? Maybe I can't even go next month. Maybe it's going to have to be three months from now.

And I need to put away, you know, a third, a third, a third each month. I mean, none of that's happening because it doesn't have to, and that's problematic.

So, what I would do, and this is going to be a little bit of tough love and it would be challenging, but I think it's in her best interest and yours for you to say, hey, we're going to turn off the credit card. Dad and I have decided we're able to give you $200 a month for the next year or the next six months, and then we're going to evaluate it. It's going to hit your bank account, you know, on the first day of every month. And, you know, it's going to happen for 12 months, but we're going to have a conversation in six months. And then we're going to have a conversation in 12 and decide whether that stops at that point.

And, you know, you need to come home, let me know, and I'll buy your plane ticket. And now all of a sudden, we've turned this off and we get her into a situation where she's really budgeting. Then you guys build your budget. You know your expenses. You can live within it.

Now, all of a sudden, we've stopped any charges on that card that are not budgeted items. And now, that $2,000 a month is get this balance coming down to where it's zero. And then we're in a situation where the only thing hitting that card are budgeted expenses that get paid in full every month. Does that make sense? Yes, it does.

And I'm still, or we are still concerned about how we can whittle the rest of that card down. And well, at 11%, you're in great shape. I mean, most the average interest rate's 20 plus.

So if you're at 11%, I'd say leave that right where it is. It probably doesn't even make sense to go into credit counseling. The key is you've got to stop the bleeding. And that means turning off access to the card from your daughter and only charging budgeted items.

So that way, any new charges that hit that card are things that are in your budget. The cash is there. You're ready to pay it off. And now, if you've got a surplus of $2,000 a month or whatever it is, well, if we've turned off any additional charging that doesn't have money already allocated to it, you're only seven months away from that balance being zero. The problem is there's all these other charges that are creeping in.

Some you know about, some you don't, and that's why you're not making any progress.

Okay, I understand. Those are really good thoughts. And well, and I think the key as you talk to your husband is because listen, these are not easy conversations. We love our kids. We want them to have the best.

She's halfway across the world, you know, and we want to be able to make sure she has what she needs. And, you know, London's not inexpensive. I mean, it's an expensive place to live. But I think what you have to keep reminding yourselves of is that we're not doing her any favors. We're not setting her up for success in the future to be a wise steward.

We're actually reinforcing the wrong behaviors. And that's the last thing we want to do. We want to get her to a place where she can manage this money the way she needs to now and in the future. And the only way to do that is to learn the hard knocks of budgeting and limited resources and saving and delayed gratification. And none of that's happening under this current model.

Does that make sense? Yeah, it does.

Okay.

Okay.

Good. Hey, I. I really appreciate your call and I hope this was helpful to you today. And if we can serve you in any other way in the future, give us a call. Folks, it is always a joy to be along with you.

We're so grateful for your calls, your encouragement, your testimonies. And when you support our work here at Faith5, I go to faithby.com and clicking give. Big thanks to my team today. Jim Henry providing great research today. Adam Suddeth was handling our engineering and production today, as well as our phone screener today, Pat Montague.

On behalf of the entire team here at Faith Fi, I hope you have a great weekend. Come back and join us next time. We'll see you then. Bye-bye. Faith in Finance is provided by FaithFi and listeners like you.