IRS sent letter about unfiled 2013 taxes in 2020 - what are my options now?

The IRS generally has a 10-year statute of limitations for collecting taxes once they've been assessed, but there's no time limit for them to assess taxes when a return hasn't been filed. So unfortunately, they're well within their rights to come after you now for 2013. You have a few options here. First, you could verify their calculation is correct by filing your 2013 return now (even though it's very late). If you had withholding that year that they haven't accounted for, this could reduce what you owe. Second, you might qualify for penalty abatement due to your personal circumstances that year. The IRS has a "First Time Penalty Abatement" policy for people with otherwise good compliance history. This would reduce the penalties but not the interest or original tax. Third, if you're unable to pay the full amount, you could request an installment agreement to pay over time, or possibly an Offer in Compromise if you can demonstrate financial hardship. Settling tax debt through proper channels won't directly impact your credit score. Only if you ignore it and they place liens or levies would it affect your credit.

After dealing with a similar situation (missed filing 2015 taxes until IRS contacted me in 2022), I found an AI tool called taxr.ai that really helped me figure out my options and how to respond. I was completely overwhelmed with their notice and didn't even understand all the penalties they were charging me. The website https://taxr.ai analyzed my IRS notice, explained all the jargon in simple terms, and gave me a step-by-step plan for responding. It showed me exactly which penalties I could challenge and what documentation I needed. Even calculated what my actual tax liability should have been based on my information. It definitely saved me from panicking and just paying the full amount they wanted, which would have been about $1,800 more than I actually needed to pay once I filed my late return correctly.

I wanted to follow up about my experience with taxr.ai that someone recommended above. I was super skeptical about using an AI for something as serious as dealing with the IRS, but I decided to try it since my situation was similar (unfiled 2014 taxes). It was actually really helpful! I uploaded the IRS letter and it broke down exactly what all the penalties were and showed me how much I could potentially save. The tool generated a request letter for penalty abatement that I submitted, and the IRS actually approved it! Saved me about $800 in penalties. The step-by-step guidance made me feel way more confident in handling this myself instead of just panicking and paying whatever the IRS asked for. If you're dealing with unfiled taxes from years ago, it's definitely worth checking out.

If you need to talk to the IRS about resolving this, good luck getting through to an actual person. I spent THREE WEEKS trying to call about a similar past-due tax notice, constantly getting disconnected or waiting on hold for hours. Finally found a service called Claimyr (https://claimyr.com) that got me a callback from the IRS within 2 hours. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c Seriously saved my sanity. The IRS agent I spoke with was actually really helpful once I finally got through, and I was able to set up a payment plan that worked for my situation. They even removed some of the penalties when I explained my circumstances.

I need to eat my words about Claimyr. After posting my skeptical comment, I decided to try it anyway since I was getting nowhere with the IRS about my own tax issue. It actually worked! Got a call back from an IRS agent in about 3 hours. I explained my situation with unfiled taxes from 2016, and the agent helped me set up a reasonable payment plan. They even suggested I submit a letter requesting penalty abatement, which I didn't know was an option. Sometimes being wrong feels pretty good. If you're struggling to reach the IRS, this service is legitimately helpful. Saved me from taking a day off work just to sit on hold.

Something to consider - before you pay anything, make sure the IRS calculation is correct. When this happened to me, they calculated my tax based on reported income but didn't include any deductions or credits I would have been eligible for. File your 2013 return ASAP (even though it's super late) with all your eligible deductions. This might significantly reduce the base tax amount, which would also reduce the interest that's been accumulating. If you still can't pay the full amount, look into an Offer in Compromise. It's a program where the IRS agrees to settle for less than the full amount if you can prove financial hardship. It's not easy to qualify for, but worth investigating.

If nobody has mentioned it yet, call the Taxpayer Advocate Service. They're an independent organization within the IRS that helps taxpayers resolve problems. Their service is free and they can help negotiate with the IRS on your behalf, especially in cases with financial hardship or when the regular IRS channels aren't working.

I went through something very similar with unfiled 2012 taxes - also due to personal circumstances that made me completely neglect filing. Here's what worked for me: First, don't panic and pay the full amount right away. The IRS calculation is almost always inflated because they assume worst-case scenario (no deductions, married filing separately even if you're married, etc.). I'd strongly recommend filing your 2013 return immediately, even though it's late. You can get all your income documents from the IRS using their online transcript service. Even if you can't find all your receipts for deductions, you can at least claim the standard deduction, which the IRS probably didn't include in their calculation. In my case, filing the late return reduced my tax liability by about 40% because the IRS had calculated it without any deductions. Then I requested penalty abatement for reasonable cause (grief/personal hardship) and got most penalties removed. The key is to be proactive and communicate with them rather than ignoring it. They're actually pretty reasonable when you explain genuine hardship situations and show you're trying to resolve it properly. Also, this won't hurt your credit score unless you completely ignore it and they end up filing liens. Properly working with the IRS to resolve tax debt doesn't get reported to credit agencies.