Filing old tax returns are frequently the first thing that needs to be done before you can deal with your tax problem. Many taxpayers fail to file taxes every year, normally because they would owe or a business failed and one just doesn’t want to deal with the final details. Again, ignoring this just makes things worse. If you don’t file a return, the IRS or Franchise Tax Board (FTB) can file a “SFR” Substitute for Return for you where they either estimate your income based on some parameter, or use 1099’s that have been filed to estimate you income.
Usually the earnings are estimated without the benefit of any expenses being estimated as well, resulting in tax liabilities much larger than they would be if prepared in the first place.
We have seen situations where the IRS says the taxpayer owed $200k for 10 years of unfiled returns. Often those clients just assume that is what they owe without realizing that those balances may have just been estimated for unfiled returns, and by filing an actual return it may reduce the amount owed by 80-90% or maybe not owe at all.
We deal with this situation on an ongoing basis. Another reason returns may not get filed is that the records were lost or destroyed and the taxpayer feels that there is no way to file a return. Our strategy is a realistic approach to help you get these returns filed as simply as possible and if you owe, we can help set up an Installment payment plan or even see if you might qualify for an Offer-in-Compromise.
When records aren’t available we find other approaches that streamline this process and helps get those returns done. Our primary approach is to contact the IRS or FTB and order a transcript that lists every source of income or expense that was reported to the IRS or FTB for a particular year as well as using bank records if available. This approach helps to get realistic returns filed and get your tax life back on track.
Contact us if this is the tax situation you are facing. Just a simple phone call to talk with one of our experienced staff can be just what you need to hear.