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Back Tax CPA tax accountant discusses IRS tax Form 4549, Income Tax Examination Changes | IRS tax problem

Form 4549 CPA discusses back taxes and unfile returnss

Sometimes Form 4549 results in a tax refund. Strange but true. Our virtual allows us to offer back tax help wherever you live.  (910) 399-2705.

Back tax CPA tax accountants sometimes deal with Form 4549, Income Tax Examination Changes. An income tax examination means the IRS will eat your lunch under the right circumstances. Of course, your back tax CPA tries to prevent that. The IRS Form 4549 instructions aren’t great. But the good news is now you an actual IRS Agent working your back tax case. I don’t work for the IRS but I’ll bet these income tax examination change IRS Agents get evaluated by their case closure rate. So, sometimes, Form 4549 works to your advantage. For example, I had one Client where the IRS Agent agreed the financial condition of my Client made him a hardship case. So even though he owed tax, at least after we received IRS Form 4549, the Client got put in currently uncollectible status. Because he was elderly with only Social Security income, his hardship case should last a lifetime.

The IRS becomes your back tax CPA

Tax Form 4549, Income Tax Examination Changes, usually results when the IRS becomes your back tax CPA accountant by preparing “substitute returns.” Why? They didn’t receive an original tax return from you. Form 4549 shows the IRS back tax return preparation process, tax line by tax line. CPAs take it seriously because it sometimes results in an IRS demand for more taxes, interest and penalties. Substitute tax returns rely on information the IRS collects; so that’s mostly income related. They don’t factor in legitimate deductions and tax credits. Filing an accurate back tax return usually decreases the IRS demand on Form 4549. And it sometimes generates a tax refund. But you can only generate an IRS refund for the last three years. Every CPA and IRS agent has horror stories of taxpayers losing huge tax refunds by filing beyond the three-year limit. My personal story? Client lost $16,000 of refund by filing two days late. Ouch.

“I see Form 4549 as an IRS technique to grab your attention when you have unfiled back tax returns.”
– Gary Bode, back tax CPA accountant

While I am a back tax CPA accountant, this post provides general information on Form 4549 and can’t reasonably be used as specific advice. Every situation is different.

Your CPA tax accountant tries not to open up a can of worms

Clients sometimes open up other issues for the back tax return Form 4549 references, and/or, similar tax circumstances for other back tax years. I’ve had many cases where it was obvious that other problems existed with the tax return, and probably, other back tax years as well. But the IRS Agent can ignore them unless you bring it to their intention. And you really don’t want to do that.

While it should go without saying so, don’t poke the bear. I’ve dealt with the IRS for decades now and have only encountered one Agent who was unprofessional. While the IRS expects the Agent to stay professional, you can get them angry enough to expand the scope of the income tax examination changes. Be polite.

Common Back Tax Scenario: IRS Form 4549

  • You or your company don’t file tax returns.
  • The IRS politely asks you for them.
  • The IRS politely asks for your back tax returns again.
  • The IRS becomes your back tax CPA by preparing substitute returns. Ouch! The substitute return calculation, in my experience, is always high. Why?
    • It doesn’t use legitimate deductions and tax credits.
    • A correct back tax return almost always reduces the taxes, penalties and interest.
  • The IRS mails you a package, with Form 4549, delineating their work on your behalf, tax line by tax line.
  • The taxpayer doesn’t understand Form 4549 except for the total amount due! The Form 4549 instructions don’t help much either.
  • The taxpayer recognizes there’s a tax problem.
  • The taxpayer calls a back tax CPA.
  • Sometimes CPAs ask the IRS for more time. The IRS is usually gracious about this, at least when a CPA has been retained by the tax payer.
  • The CPA prepares correct back tax returns. Sometimes, amazingly, back tax cases result in a refund!
  • Your CPA takes care of your State’s back tax returns too.
  • Back tax CPAs try to have penalties reduced or abated.
  • We stay on the case to coordinate all the IRS follow-up notices as the tax returns percolate through the various stages of IRS administration.
  • If you owe tax to the IRS, your back tax CPA looks to see if the IRS will accept less as payment in full.
    • The IRS recently relaxed qualifications for Offers in Compromise.
    • They have an online offer in compromise pre-qualifier tool on the IRS website. Take a few minutes to use it.
      • With an Offer in Compromise the IRS looks at your current and future income.
  • If you owe taxes, CPAs help you with cash flow issues.
    • Sometimes that’s an IRS Installment Agreement. Your back tax CPA has a few strategies for installment agreements.
    • Sometimes that’s getting you into “currently uncollectible” status.
  • Back tax CPAs follow through with federal lien release and federal lien withdrawal when appropriate.

“Sometimes Form 4549 allows me to turn lemons into lemonade and generate a tax refund.”
– Gary Bode, back CPA accountant

Tips, pitfalls and traps in back tax return preparation secondary to tax Form 4549

  • Don’t ignore Notice 4549. Your options phase out with time, culminating in an IRS tax lien and eventual levies e.g. seizing assets or garnishing your paycheck. Why does it take so long for the IRS to act? Who knows? But you’re in their sights now and they won’t go away.
  • It seems logical that the IRS scrutinizes back tax returns. I’ve had several cases where the IRS wanted backup documentation. They’ve never denied my taxposition, they just wanted proof.
    • Your back tax CPA will help reconstruct appropriate tax documentation.
  • Don’t open up other tax problems.
  • Understand the tax issues carefully before self preparing the back tax returns.
  • Look for red flags in your tax returns. Explain them on the return and/or provide relevant documentation.

“I don’t recommend allowing the IRS to become your back tax CPA accountant. Their “substitute tax returns” don’t factor in legitimate deductions and credits.” 
– Gary Bode, back tax CPA accountant

Do you need a back tax return CPA to deal with Form 4549?

It depends. You are sorta kinda painted into a corner by the time Form 4549 comes into play. Plus you don’t have experience with an income tax examination change. The potential tax can be significant. The process is gut wrenching for some Folks. So, if you get uncomfortable, give us a call for a free phone consult. Gary tries to help and doesn’t hard sell Folks. He’s been around the block a few times and handles most IRS tax problems.

We’re a back tax CPA accountant firm with a virtual office for long distant clients. We have hundreds of posts on this website, dozens dealing with back tax, audit issues, levies, garnishments, etc. Reading a few should help you with general information about our ability and attitude. For a free phone consult call (910) 399-2705.

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