Is it possible and how difficult would it be to file taxes for a friend who hasn't filed since 2015 and often worked under the table? What will be the cost range if we decide to hire someone to handle this, recognizing that costs can vary by state?
Answered on September 28,2023
There's some good information here about getting someone caught up:
Your friend should try to access their Wage and Income transcripts online. They should be able to get the last ten years online, but they will be partially redacted. They have to call IRS to request Unmasked Wage and Income transcripts if they want the full versions; they may have to make an appointment for this if they can't answer the verification questions on the phone.
They'll probably need to file the last six years in order to be in compliance with IRS. If there are state income taxes, search online for a voluntary disclosure process for the state's tax agency.
There also are free tax preparation programs that can help, but they may not be able to do all the years required by IRS. And your friend would need to have information about the under the table income they made over the years, plus their Wage and Income transcripts from IRS.
Most of the free tax preparation programs can do the last three years plus current year, and some will do older years but only after the regular tax season. The locators usually get updated in late December / early January.
Free Tax Return Preparation for Qualifying Taxpayers
Your friend will probably owe taxes if their income was mostly under the table, but they can set up a payment plan once all the required tax returns are processed. Because this can take several months, they'll probably need to request a hold on collections when they get the first balance due notice. Sometimes you can set up a payment plan before all returns are processed by faxing copies of the filed but unprocessed returns to IRS collections.
If they are low income they may qualify for help with payment options from the local Low Income Taxpayer Clinic. They can help figure out the best option for your friend.
https://www.taxpayeradvocate.irs.gov/about-us/low-income-taxpayer-clinics-litc/
The good thing is that once the tax returns are processed IRS can only collect for ten years. Sometimes people just need to file and then get a partial payment plan where they just pay what they can for the next ten years. Or your friend might qualify for an Offer in Compromise, but it's a good idea to get help for that. Here are some summaries of the options.