Overview of "We Haven't Filed Taxes Since 2020"
This Ramsey Network episode covers two caller segments. The main caller admits she and her husband haven’t filed tax returns since 2020 because he struggled with alcoholism while running a small business; he’s now sober and their business is back on track. The hosts provide urgent, practical tax and compliance guidance. A second, shorter caller (Todd) asks whether to buy a $50,000 Harley with cash; the hosts advise balancing the purchase with retirement and investment goals. Identity theft protection (Xander) is mentioned in sponsor spots.
Key takeaways
- Failure to file federal income tax returns is a criminal offense; failure to pay is not. Prosecutions for failure to file occur (roughly 2,500–3,000 people/year), but the IRS rarely prosecutes those who voluntarily come forward.
- Act immediately: reconstruct and file missing returns (typically the past 3–4 years), even if records are incomplete.
- Use a trusted tax preparer (Ramsey-recommended tax ELPs) to reconstruct records, file returns, and negotiate payment plans if needed.
- Misclassification of workers as 1099 contractors is common; review whether the business’s 1099s were appropriate—your tax preparer can help.
- For large discretionary purchases (like a Harley), it’s OK to buy if you can afford it, but first make sure retirement and investment plans are adequately funded.
Detailed advice given (tax situation)
- urgency: Do not wait. File as soon as possible to avoid criminal exposure and to be in the IRS’s good graces.
- reconstruction: If records were not kept, reconstruct income/expenses for the missing years as best as possible (bank statements, invoices, receipts, client records).
- filing scope: Usually file at least the last 3 years (sometimes 4), but follow your tax advisor’s recommendation.
- payment options: If taxes are owed, set up a payment plan with the IRS or consider using available savings—being proactive improves outcomes.
- professional help: Engage a Ramsey-trusted tax preparer or tax expert to ensure accuracy, find deductions, and handle worker classification issues.
- worker classification: If the business labeled workers as 1099 but they met employee criteria, the tax preparer can advise corrections and implications.
Action items (step-by-step)
- Contact a tax professional immediately—preferably one recommended by Ramsey Solutions or another trusted preparer.
- Gather available financial records: bank statements, invoices, receipts, client payment records, business bank accounts, payroll records, and any existing tax documents (W-2s, 1099s).
- Reconstruct income and expenses for the missing years (3–4 years is typical). Your preparer can guide how to estimate where necessary.
- File the reconstructed returns as soon as possible.
- If you owe money, set up an IRS payment plan or arrange to pay from savings—do not ignore the liability.
- Review worker classifications (W-2 vs 1099) with your tax professional and correct misclassifications if found.
- Put in place ongoing bookkeeping and tax-filing processes to avoid recurrence.
Second caller (Harley purchase) — summary & recommendations
- Situation: Caller has $50,000 cash, wants to buy a $50,000 Harley. Household income appears to be around $350,000/year. Existing assets: a $15,000 Harley, paid-off vehicles, some retirement savings.
- Advice:
- Buying the Harley with cash is reasonable given his income and lack of debt, but expect loss of value on the toy—treat it as an expense, not an investment.
- Sell the current Harley (worth ~$15k) to offset the cost.
- Before spending, confirm retirement savings and investments are optimized—if you’re earning $350k/year you should be investing aggressively to build substantial net worth for retirement.
- Consult a financial advisor to ensure investment allocation and retirement plans are on track before making the purchase.
Notable quotes / memorable lines
- “Failure to file income tax returns is a federal criminal offense. Failure to pay taxes is not.”
- “Come in out of the cold as quick as you can.” (Advice to voluntarily approach the IRS rather than wait)
- “You don’t want the men in black showing up…” (hyperbolic warning to emphasize urgency)
Resources mentioned
- Ramsey Solutions tax ELPs (recommended for help reconstructing and filing past returns)
- Xander (sponsor) — identity theft protection: Xander.com
Final takeaway
If you haven’t filed recent tax returns, treat it as an urgent compliance issue: hire a qualified preparer, reconstruct and file the missing years immediately, and work out payments if needed. For discretionary purchases, prioritize ensuring retirement and investment plans are solid before spending large cash sums.