Here are some tips on back tax return preparation. If you run into problems consider calling us at (910) 399-2705.
Back tax returns CPAs know there is no typical back tax client. They’re just normal folks who somehow got off track with the IRS.
The IRS usually waits years before asking for unfiled returns. Who knows why. So, a new Client often needs back tax return preparation for multiple years. I’ll offer tips I’ve learned as a CPA over the years, and present how I approach the process. If you don’t feel confident filing back tax returns yourself, consider calling us for a free consult. Our virtual office serves a nationwide practice.
Common Back Tax Return Scenario
- The IRS or State sends out a series of Notices.
- The IRS prepares “substitute tax return” using information they have on file. Naturally this includes back tax, penalties and interest.
- Finally Form CP 504 threatens a federal tax lien, the last step before seizure of assets or garnishment of wages.
Sometimes Back Tax Return Preparation results in Refunds
I know that’s hard to believe. But the IRS substitute tax returns use income related info to generate their demand. An accurate back tax return includes legitimate deductions and tax credits, sometimes generating a tax refund. But after three years you lose the refund. The biggest lost refund I’ve seen? $16,000. Sad but true.
How I Approach Back Tax Return Preparation
I understand some folks self-prepare back tax turns. Please note you can’t reasonably rely on this website alone for information. Every case is different.
- Stress relief. Clients are anxious. They imagine the worst. I run interference between the Client and IRS.
- I listen carefully to the Client’s side of the story.
- If I think we can help, I provide an Engagement Letter that delineates our services.
- Generally we ask the IRS for more time to prepare the back tax returns.
- We obtain IRS and State Power of Attorney. This allows us to communicate with these Agencies.
- I pull the IRS account information.
“The IRS assumes it’s correct, you must prove them wrong with accurate tax returns.”
- Gary Bode, back tax CPA
- I ask the Client for all pertinent back tax information. Sometimes we help re-construct lost data.
- Prepare the back tax returns. Now we know the accurate amount of tax liability or refund. For both the IRS and State.
- I look for IRS red flags on the back tax returns.
- If red flags exist I use supplemental information or a cover letter to explain them. I try to offer what a dubious IRS Agent wants to see in the first two minutes of examination.
- With a refund, most penalties and interest disappear.
- If the Client does owe back taxes I look to see if the IRS might accept less (than the full amount) as payment in full through an Offer in Compromise.
- If the Client owes back taxes I look at an Installment Agreement to allows paying off the tax liability with monthly payments.
- Even if the client has a tax liability I ask for penalty abatements.
- We handle the inevitable post filing aggravations.
- I reconcile all the back tax return taxes, penalties and interests once the case is almost complete.
Other Tips on Preparing Back Tax Returns
- Understand the tax issues involved.
- Understand the IRS process.
- Understand your rights as a taxpayer.
- Document every figure. It’s logical to assume the IRS looks at back tax returns carefully.
- Use tax software.
- Be accurate, the IRS is already interested in you.
- Act sooner than later. The IRS eventually loses patience.
- Don’t expand the tax issues by self-incrimination.
- Send the IRS information by certified post if the timeline is tight.
- Call the IRS to see if they’ve logged the information in. Occasionally they post it to the wrong year or just lose it.
- Be prepared for the long haul. I’ve seen the IRS take over a year to process back tax returns. There’s often conflicting Notices.
We have nationwide back tax CPA practice. Don’t let distance dissuade you if you like what you read. (910) 399-2705.
Find me on Google+