WHAT DO I DO ABOUT BACK TAXES OR BACK FILING?
When talking to taxpayers about tax debts or tax returns that have to be filed, we always look at it from the perspective of, “what options will ultimately exist for resolving the amount owed, and how can we make this as easy as possible?” This is different from tax professionals who only file tax returns, then throw you to the IRS wolves in solving the most important part of the problem, “What do I do now?” After all, isn’t that the most important part of this? If you end up owing $50,000, and that can potentially put enough of a dent in your Financial Future, that looking at how you solve that problem, compared to simply filing tax returns and getting you to the point with the IRS that they know you have a tax debt, makes the filing of the returns seem trivial.
Let’s start with back tax returns. If you have unfiled tax returns, they need to be filed, or the IRS will file for you. They cannot go after you to collect, until an assessment of tax is made. That’s means they can file for you, and if they do, they will not have any expense information, which could be used to lower what you owe, and the IRS will not give you credit for your own personal exemption, so you will be taxed on income that otherwise you would not.
If you are self employed and the IRS does not get several years tax returns, they may file for you, what is called a Substitute for Return, and they often use the year you earned the most, to calculate EVERY year, thus you will owe more. So what do you do?
First off, if you need to get copies of tax transcripts, be careful. If you contact the public phone numbers, you will get through to Automated Collection. The name tells all. They collect tax. If you want your transcripts, they will ask you where you work and bank, allowing them to collect down the road. When we obtain Tax Transcripts, we utilize the Tax Practitioner Unit of the IRS. Those numbers are not available to the general public.
This allows us to obtain information for filing tax returns, without it raising red flags at the IRS, as that Division of the IRS is Independent of the Collection Division. So we can file your tax returns, to determine what you owe, without triggering Collection Action against you. What then? Well if you have a debt, determined after filing all of your tax returns, its important HOW those tax returns are sent to the IRS.
You don’t want to send a few tax returns to the IRS, then a few more a few weeks later, or a few months later. Many CPA’s who do not work on solving tax debt issues, but only file tax returns, do not understand this. WHY? When those first tax returns are processed as the IRS, and you have a debt, it triggers Collection Action against you. Yet if you want the IRS to release your Wage Levy, or Bank Garnishment, they will tell you, you need to file your tax returns.
Don’t allow simple “tricks of the trade” to make solving your IRS problem more complicated than it has to be. This problem is easily solved, if you have experience and always look at the end first, “What do we do to solve your tax debt problem”?