The filing on any past due tax returns is required before the IRS will consider any solution to a tax problem. We meet you in face-to-face in person meetings to aggressively defend you.
Unfiled tax return
Falling behind on filing your taxes can be scary, filled with questions and doubt about how to make it right with the IRS. Fortunately, there are steps that can be taken to satisfy the IRS and get you back into the system. Here are 13 things you should know about getting current with your unfiled returns: The IRS has a helpful website to assist with unfiled returns.
- In most cases, the IRS requires the last six years’ tax returns to be filed as an indicator of being current and compliant. The reference is IRS Policy Statement 5-133 and Internal Revenue Manual 220.127.116.11. This is the starting point – preparing the last six years’ returns for filing. The IRS has a helpful web
- Gather your records. It is important to do your best to pull together your records for the years where you did not file. This can include 1099s or W2’s you received for work your performed, mortgage interest you paid, or interest, dividends and stock sales. Don’t worry if you are missing records, this is just a starting point.
- Your records are supplemented by securing internal IRS transcripts that will show what has been reported to the IRS – this will be a comprehensive listing of the 1099s and W2s that were sent to you. This cross-checks against your own records, filling in for anything that is missing.
- The IRS transcripts are a checking point – if there is income you earned that is not on the transcripts, best efforts need to be taken to determine that income and include it on your return.
- If you are self-employed, business income and expenses need to be determined. Income can be pieced together by several methods, including 1099 reporting to the IRS (supplemented by any income not reported), or your total bank deposits. Working backwards, determining what you spent to live (food, housing, utilities, auto expense) can cross-check your income on the presumption that you at least earned what you spent and saved.
- Before preparing the returns, a financial review should be completed to determine how any taxes can (or cannot) be repaid to the IRS. Unfiled returns are really a two-step process, consisting of (1) getting the returns prepared and filed and (2) negotiating solutions to balances due with IRS collections. This involves a review of your current income, living expenses, property and debts. It is often the case that the amount owed on unfiled returns cannot be repaid – you may qualify for an offer in compromise, or may be considered in financial hardship – in those cases, the IRS puts collection of the debt in forbearance (known as uncollectible). Bankruptcy could eventually eliminate the tax debt.
- If you are married but only one spouse earned income, strong consideration should be given to filing a separate return for the spouse that caused the liability. Filing separately can limit who the IRS can collect from – protecting your innocent spous
- If you were employed with wages and had taxes withheld from your paycheck, it is possible that you may not owe the IRS at all. This will depend on the amount withheld from your wages and any other deductions you may have (mortgage interest, etc.). The IRS charges interest and penalties only on balances due – so there are no penalties if you do not owe. And if you have refunds, you should actually receive those for the last three years’ returns (but note the refunds will be applied to any balances due for other years).
- File for yourself before the IRS can file for you. When you fail to act before the IRS does, they will file a substitute for return (SFR) for you. An SFR is based on the IRS’s best guess of your income, and will have penalties and fines tacked onto your tax bill. You may already have a bill from the IRS from a Substitute for Return. These estimated returns can be corrected – and the tax lowered – by filing an original return. There is no chance for deductions on an SFR, so it makes sense to file your back taxes before the IRS has a chance to file an SFR for you.
- If you are working with an IRS Revenue Officer, the returns should be filed direct with that person. It can take the IRS several months to process the returns – watch for billing notices in the mail that will indicate the IRS processed the returns and you are back in the system. If you owe money, the next step is solutions to the balances due -usually consisting of compromise, installment agreement, uncollectible and bankruptcy.
- The IRS knows you haven’t filed. If you have unfiled tax return
s, the best way to stay out of trouble with the IRS is to immediately file your back taxes. Think that the IRS doesn’t notice your unfiled tax return s? Think again. Even if it’s been years since the unfiled taxes, the IRS can notify you at any time that they know and are ready to aggressively pursue back tax payments.
- Unfiled tax return
sare a crime. Unfiled tax return shave criminal consequences, as well. If you fail to file, the IRS may criminally prosecute you. Claiming an inability to pay for your tax bill is unacceptable to the IRS; they will assess fines and penalties on top of what you originally owed if you fail to file your tax return.
- Were you owed a refund? Not anymore. Were you owed a refund in a year that you had unfiled tax return
s? After the three year statute of limitations, the U.S. Treasury retains ownership of your refund, and overpayments cannot be applied to other years. In other words, failing to file taxes will never make your situation better, only worse.
If you have IRS tax problems because of unfiled tax return