Delinquent Tax Returns : Chapter 2
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Delinquent Tax Returns Or Back Taxes
If you have back tax returns to file the IRS can and will use the delinquent returns against you in many ways. For example… If you have a refund coming to you, and you file more than 3 years past the due date (including valid extensions) the IRS will keep the refund. The IRS will not even offset the refund against a tax liability from another year. (Although lately I have seen computer errors doing this). If you are in a “binding” installment agreement to pay a prior tax liability, or in an uncollectible status, the filing of any return or the paying of any tax late will void the agreement and cause all money to become due immediately. Often when an agreement is in default, taxpayers find out via a levy on their bank account or paycheck. Even worse, taxpayers may find out through a levy on their spouses paycheck or a lien on their house and other property! Taxpayers are not always notified first. Sometimes, even the representative was not notified! The IRS may have filed a return for you, charged you with the tax, and is now about to take collection action against you, and you do not even know it yet. You are about to find out the hard way! Even if you like the way they prepared the returns, (probably because they charged you with less tax than you thought you owed), you still need to sign the return. Otherwise, the statute of limitations on assessment does not run. This means that the IRS can audit you and/or charge you with additional taxes at any future time. Normally they have three years from the time you send a return in. Even if for some reason you are not required to file, you should file anyway. This would protect you from having to prove that you were not required to file many years after the fact!
Unfiled Back Tax Returns
You need to file any unfiled back tax returns immediately. Even if you are missing records, afraid that there is a possibility of owing money, or you are confused about how to fill out the returns, or afraid to tell the IRS where you are, you still need to file now. O.K., not right now, we have to put a plan of action together first. That is, assuming you owe more money than you can send in with the returns. Let’s examine your choices…
You have no IRS problems other than you have failed to file one or more years of back tax, unfiled, or delinquent returns. You received an IRS letter asking for the return. If you can pay the balance in full, plus interest and penalties, then send the IRS the return with your check for the money owed. Write the check out to “U.S. Treasury” and send it with the returns to the office that requested it.
The problem comes when you are either contacted by a R.O. or ACS asking for money from returns the IRS filed for you, or if the IRS sends you a cp2000 or other letter where they are proposing a liability. This could be based on a W2, 1099, K-1, etc. sent to the IRS reporting income in your behalf. Then you must take actions to refute the liability or make arrangements to establish an installment agreement or other method of payment.
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