Unfiled tax returns are a common occurrence. Often they come to light when a taxpayer tries to get a mortgage and 2 years of tax returns are needed for the loan application.
Sometimes they come to light when an IRS letter is received.
Sometimes people just want to feel better.
Whatever the reason, we can help. We have filed as many as 8 years of past returns at one time (in less than 10 days) but 2-3 year filings a is very common occurrence.
NOTE: You should know that refunds that are owed you can’t be collected if the return is filed 3 years or more past the due date of the return.
When there are a number of years to file, and you have not received any requests from the IRS, we usually file the last 3 years and see if the IRS requests more. Often, they don’t and filing the 3 years brings you up to date. It is not unusual for them to ask for 6 years and occasionally they ask for more, especially if they have information showing undeclared income for prior years, such as W-2’s and/or 1099″s, or if they suspect fraud or criminal activity.
If there is danger of garnishment or some kind of IRS collections process that is imminent, then it is important to file all returns that have been requested by the IRS and to meet their deadlines. When information is missing for a particular year or years, we typically file what we can and request additional time along in a letter of explanation along and a phone call. We can usually receive an extra 30-60 days which allows enough time to order transcripts and/or compile other information, such as business expenses.
If you can’t make immediate payment of any tax due and want to setup an installment plan or request an offer in compromise, you will probably have to file all missing returns, back 6 years.
There are penalties for filing late and penalties for paying late but the penalty for filing late can be 10x that for paying late. So, it is always important to at least get the returns filed. You will still have interest and late payment penalties but that will lessen the final costs. The only payment method acceptable to the IRS if returns are missing is a total payment of taxes assessed for all returns filed.
Once all returns are filed, you can decide which alternate payment method is best for you. We mentioned immediate payment, installment plans and the offer in compromise. Close to 90% of collections efforts are settled with an installment plan while less than 1% are settled with the offer in compromise (I know, sorry). Installment plans typically allow you 5 to 6 years to pay off the debt (depending on amount owed) and interest rates charged are much lower than those on a credit card.
But if none of those work for you, you may be eligible for a reduced payment plan, where payments accepted are lower than what is needed to pay the debt off in 5-6 years or what is called a currently uncollectible status. The latter is sometimes granted in situations where no money is available now but is expected to be available at some later date. While holding that status, interest and penalties still accrue but collections actions are forestalled. No levies or liens or garnishments. (Note that a bankruptcy filing can also stop collections actions.)
The other thing I should mention is about 40% of prior year returns we do result in a refund. You never know until the return is prepared.
Bottom line, if you are in this situation, you’re not alone and we can help. Our tax preparation fees are very reasonable and we even offer a quote service so you have a very good idea what you will be charged before starting the process. Just go to https://afsnodebt.com/pricing-get-quote/ . And we offer discounts for multiple years.
Check us out, you’ll like what you see.
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