What should be my next step? You need to obtain a tax clearance
My only income in US since then has been interest on bank accounts and dividends on some mutual funds/ shares all amounting to under $500 each of the years. I have been paying taxes as a Jamaican resident for 2007-2011. Also for all these year I fail the substantial presence test (31 days/ yr or 180 days/3yr).
Based on that information - you are not required to file your US tax return for these years providing you will have the tax clearance.
No I am moving back to US as a worker and will be considered resident when I file this year returns 2012. My questions are,
1. How do I clear myself with IRS?
You need to obtain a tax clearance.
2. Is there a way to file the Departing alien clearance retroactively?
Yes - you may file late.
3. Basically how do I get out this whole mess and whether this is something I could on my own (I should be able to find the 1099s etc for all years and copy of my return for 2006) or do you recommend a tax company or a law firm?
Yes - you may file on your own. All required information you will find in this IRS article - http://www.irs.gov/businesses/small/international/article/0,,id=97256,00.html
Unfortunately - I may not recommend any specific service. You may use any tax preparation service. You do not need an attorney - your situation is not as complex.
Let me know if you need any help.