Can I File Two Years of Taxes at One Time?

Taxpayers can fall behind in filing their income tax returns for any variety of reasons. And it's often easier to prepare two returns at one time, while you already have all the tools and forms at your fingertips, than to do them separately. However, there some implications you should seriously consider before planning to double up on filing your tax returns.

The IRS does not have any rule forbidding you from filing two years of taxes at one time. You are free to file your return at any time, but if you owe tax as a result of a past due return, penalties and interest will be assessed. The failure to file penalty is assessed at a rate of 5 percent of the unpaid tax for as long as the tax remains unpaid, and the failure to pay penalty is assessed at a rate of ½ of 1 percent of the unpaid tax. If you file your 2009 return now, penalties and interest will accrue from the due date of the return — April 15, 2010. The interest accrual rate is set quarterly and is the standard federal rate plus 3 percent.

Although you can file going back as many years as you like, you can only receive a refund going back three years. If you have already filed a return and make changes to the return, which result in a refund, then you have three years from the date on which the original return was filed to claim the refund.

If you made a mistake on a prior year return, then you need to file an amended return — not a new return. Although the IRS will automatically correct math errors on a return, it does not check your return to determine if you claimed all the available deductions or credits available to you. Nor will the IRS automatically subtract from you any deductions or credits that you claimed inadvertently (although questionable items on a taxpayer's income tax return can trigger an audit). If you need to correct an item on your return, then you must complete a 1040-X and mail it to the IRS service center that processed your return. The time frame for processing an amended return is eight to 12 weeks.

Keep in mind that you can only file your current year return online. Prior year returns must be filed by mail. The IRS has forms, publications, schedules and instructions dating back many years. Download the instructions for the year in which you are filing an income tax return as tax law changes from year to year. This means that the eligibility guidelines for many IRS credits and deductions have probably either changed or expired. It is your responsibility to adhere to the IRS guidelines for the year in which you are filing.