Ignored my tax obligations for years - how badly am I in trouble with the IRS?

First, take a deep breath! The fact that you're ready to address this is the most important step. The IRS is actually much more reasonable than most people think when you voluntarily come forward to fix past non-compliance. Here's what you should do: File all your missing returns ASAP. The IRS is generally more concerned with getting people into compliance than punishing them. Yes, there will be penalties and interest, but those continue to grow the longer you wait, so addressing this now is smart. For payment options, the IRS offers several installment plans. If you owe less than $50,000, you can usually set up a plan online without even speaking to anyone. The minimum monthly payment is typically based on your total debt divided by 72, but you can pay more to reduce interest charges. Self-employment taxes (around 15.3%) plus income tax might mean a significant amount due, but don't panic - getting on a payment plan protects you from more serious collection actions like levies or garnishments.

I was in a similar situation but with just 2 years unfiled. What saved me was using taxr.ai (https://taxr.ai) to organize all my scattered receipts and documents. I was so overwhelmed trying to reconstruct years of income and expenses from bank statements and random invoices, but their AI actually helped identify potential deductions I would have missed in my mess of paperwork. Since you're self-employed, you'll need to file Schedule C for your business income and expenses. Getting all those expenses properly documented will significantly reduce what you owe. The service helped me identify legitimate business deductions I didn't realize I could claim, which ended up saving me thousands.

Just wanted to update after trying taxr.ai based on the recommendation here. I was skeptical but desperate enough to try anything. My situation was WORSE than the original poster - 4 years unfiled with absolutely terrible record keeping. The system actually helped me reconstruct my business expenses from bank statements and even partial receipts I had. The biggest relief was discovering I had way more legitimate business deductions than I realized. Between my home office, equipment purchases, software subscriptions, and professional development costs, I was able to reduce my taxable income significantly. I still owe the IRS money, but about 40% less than I feared. If you're drowning in unfiled tax years like I was, definitely check it out.

When I was catching up on 3 years of unfiled taxes, my biggest nightmare was trying to get through to the IRS to work out a payment plan. Spent DAYS on hold only to get disconnected. Eventually used Claimyr (https://claimyr.com) and they got me connected to an actual IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c Trust me, when you're dealing with multiple years of unfiled returns, you WILL need to talk to the IRS at some point. Having a direct line instead of waiting on hold for hours made the whole process so much less stressful. They helped me set up a payment plan I could actually afford and stopped the collections letters.

Following up on my skeptical comment - I actually tried Claimyr after getting disconnected THREE MORE TIMES trying to reach the IRS about my payment plan. I'll admit I was completely wrong. Got a call back in about 35 minutes with an actual IRS agent on the line. The agent helped me set up a 72-month payment plan and explained that since I came forward voluntarily before getting notices, they would waive some of the penalties. Still paying interest on everything, but it's way less terrifying now that I have an official payment plan and my account is back in good standing. My anxiety levels have dropped dramatically just having this resolved.

One thing nobody's mentioned yet - make sure you file ALL missing returns at once. Don't file just the most recent year thinking you'll do the rest later. The IRS wants to see you completely back in compliance. Also, if you can pay even part of what you owe when you file, it shows good faith and can sometimes result in reduced penalties. I was in a similar situation (3 years unfiled) and managed to pay about 30% upfront, which helped tremendously with negotiating the rest.

Don't forget about state taxes too! Everyone's talking about the IRS, but your state tax authority might be even more aggressive about collection. Make sure you're addressing both federal AND state unfiled returns.