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Monday, February 8, 2016
File Missing Income Tax Returns - Get Straight With The IRS
Many clients that come to Flat Fee Tax Service, Inc. for IRS income tax help, haven't filed income tax returns that are now past due. We have even had clients approach us who haven't filed a tax return in 20 years or more and now want to get back into compliance and get right with the IRS.
Fortunately for you, preparing past due tax returns by our tax professionals is easier than you think and you have a few things working in your favor. First, the IRS will not require you to file tax returns that are more than 7 years past due. More than likely, you don't have the records that you would need to prepare a tax return from further back than that, and neither does the IRS. So, even if you have not filed a tax return in 50 years our team of tax professionals won't need to do 50 years of tax returns.
For the years that we do need to prepare an income tax return, we can start by obtaining Wage and Income transcripts from the IRS. These transcripts show us all of the income that was reported to the IRS under your social security number, and will include W-2's, Interest Income, 1099's, and other relevant documents.
These transcripts are usually sufficient to give us a very good start on your tax returns. Once we have a first draft done based upon these records, our IRS Tax Attorneys will work with you to determine what other deductions, expenses, and credits can be added to the return to improve your bottom line.
Flat Fee Tax Service, Inc. has software archives that allow us to quickly prepare tax returns from as far back as 1998, and our tax experts can prepare tax returns from further back than that by hand if needed.
What happens if I don’t file my tax returns?
If the IRS and state do not receive a tax return for you their most likely response will be to file one for you. For the IRS this process is called filing a Substitute For Return (this is NOT A TAX RETURN) or a 6020(b) return. Some people may refer to these as "Arbitrary Assessments".
The IRS has a lot of information reported to them by your employer, your bank, and your customers. They will use this information to determine your gross income and file a substitute for return for you. Since they are not aware of your filing status or any business or personal deductions you can take they will not give you credit for any of these. They essentially use the same Wage and Income transcripts that we would use, but they then assume you were single, had no deductions or expenses, and wanted to be taxed at the highest tax rate.
This will usually result in a return with a balance due substantially higher than what you actually owe (unless you really were single, had no deductions, and no business expenses -- in that case, sometimes their numbers are spot on). Whatever number the IRS comes up with will usually be shared with the State that you resided in, and the State will then prepare a return for you as well, setting off a chain reaction.
Similar processes are used for business returns including wage withholding and sales tax, although the government typically has far less information available to them. In the case of payroll taxes, the IRS and States will typically use records of W-2's that you filed or unemployment information you reported to reconstruct a tax return.
If none of these records are available, sometimes they'll just take their best guess at it using your prior history to estimate what you owed. Once they do that, it's up to you to correct their figures.
What can you do if the IRS or state has filed a Substitute or Estimated Tax Return for me?
In most cases you can override the numbers that the government has come up with by requesting a reconsideration and providing a copy of the tax return with the figures that you believe are accurate. Generally, the IRS will allow you to do so, but a lot of states have time limits for filing the original return so you might be stuck with the figures they used. It is generally in your benefit to act quickly to correct their mistake rather than letter their assessment linger.
Due to the difficulty in filing old returns accurately and convincing the IRS/State to accept them, professional assistance is always recommended. At Flat Fee Tax Service, Inc., we have the team and the tax software to prepare tax returns from as far back as 1998 and can prepare tax returns from earlier than that by hand.
We are experts in recreating these older returns using wage and income information provided to us directly by the IRS and then conducting an in-depth interview to ensure that every deduction is found and every tax advantage is taken.
If you need past-due tax returns prepared, call us today for a free consultation. Our consultations are free and confidential. Our Tax Attorneys will make a call to the IRS to review the status of your account. During that call we can determine which returns actually need to be filed, and we will order the transcripts needed to prepare those returns.