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Late Filing CPA discusses Consequences

late filing CPA discusses back taxes

Gary Bode, CPA: we make it easy to catch up with your tax obligations. For a free phone consult, call (910) 399-2705.

Late filing, in CPA jargon, is when a taxpayer or business doesn’t extend their tax return by the deadline, April 17th in 2012, but then files before the extension deadline, October 15th for 2012. Of course, late filing becomes un-filed after October 15th. Eventually, after multiple years, this becomes a back tax case. I think every CPA picks up late filers every tax season. We sure do.

As a back tax CPA, I can honestly say there is no stereotypical late filing taxpayer. I’ve seen it with millionaires, lawyers, LLCs, single Moms, Corporations, self-employed folks, old, young Partnerships, etc., etc. The most common scenario? They have refunds due. Go figure. If I ever was judgmental about late filers, I’m certainly not now. Sometimes folks are hard on themselves and part of my job is just to assure them they aren’t unique and we’re going to get them through the hurdle as economically and stress free as possible. By the way, I’ve never had an IRS Agent express moral indignation about late filing.


  • Lost Refunds: with refunds due, consequences like penalties and interest, are not a big deal. However, after three years, you can’t collect your refund! That can be a big deal. However, the amount of refund can be used to offset other late tax returns that have tax liability.
  • Cascading Penalties and Interest: when a tax liability exists, penalties and interest are a big deal. These get worse as time passes. So, from this perspective, filing as soon as possible makes sense. But see below for another perspective.
  • Stress and Worry: I had an attractive Grad student tell me she had panic attacks every time she picked up the mail. After she received the first Notice, the ominous overtones sent her into depression.
  • Escalating Notices: threats from, arguably, the world’s most powerful creditor, should cause concern.
  • Tax Liens: these become public record, destroying credit and perhaps employment opportunity.
  • Levies, Wage Garnishments and Collections: having the IRS threaten to attach to your assets or your paycheck is harrowing. When I’m engaged during this scenario, the first thing I do is seek additional time.
  • Cash Flow Problems: but remember the IRS has limits on collections. But their standards may not match yours.

What does the IRS Really Want from Late Filers?

As a CPA, my impression is that they’re more interested in future compliance and not retroactive punishment. It’s obvious they want a correct return, even if they’ve prepared a “substitute return” themselves. So it pays to be contrite with them while filing. I haven’t dealt with repeat offenders, but I suspect leniency is not a factor the second time around.


  • Asking for Penalty Abatements: the IRS does abate penalties in some cases.
  • Payment Plans: the IRS offers Installment Agreements. Secondary to the recession, qualifying for an Installment Agreement is easier.
  • Paying Less than What you Owe: Here’s the infamous “pennies on the dollar” Offer in Compromise. It comes in various flavors. Qualifying is harder than in years past, despite the TV ads. But when it works, it’s great.

I’m a back tax CPA with a virtual office to accommodate long distance clients. For a free phone consult please call (910) 399-2705.

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