Back taxes. Sometimes folks, for a variety of reasons, just don’t file their taxes. Maybe the IRS doesn’t catch every non-filer, but their collective computer technology is impressive. Chances are, if you’re alive, and didn’t file, they’ll eventually catch up with you. We’re not judgmental about back tax cases. We just want to clear you with the IRS for the least dollar amount possible, in the least stressful way we can.
Back taxes can be worrisome. We hear clients describe dreading the mailman, afraid of an IRS return address. We see them worry when a normal bank request for a tax Form W-9 triggers paranoia over their back taxes. No one likes a tax audit or IRS attention.
“Surprisingly, we see back tax cases where clients had tax refunds coming. Even with the IRS penalties and interest.”
Gary Bode, Wilmington NC CPA and tax accountant
Initial IRS Notice
Internal IRS tax audits identify non filers and then generate a Notice, which is mailed to the tax payer. The Notice kindly calculates the taxes, penalties and interest due based only on the income reported to the IRS. Like from your Form W-2s, for example without using associated deductions, making the amount demanded too high and very disconcerting. We think this is just a ploy to get the taxpayer to actually file their back taxes. The IRS doesn’t really expect to get the amount demanded on the Notice. They know you have legitimate deductions.
If you need help with back taxes, we offer a free initial consult for IRS representation. We’re a Wilmington NC CPA tax firm that tackles back tax cases. (910) 399-2705.
Steps to Back Tax Resolution
In back tax cases, the first step is generally preparing IRS tax returns for all unfiled years. This takes information. The first place to look is actually the IRS, which can provide transcripts of all information they have on file for you. This includes income and some expenses, too, like say, student loan interest you paid, Health Savings Account contributions, etc. But there are always legitimate tax deductions that aren’t reported to the IRS in back tax cases. Like real estate taxes paid on your home, for example. Or expenses you incurred to receive the non-employee income reported to the IRS on Form 1099-MISC. Since back tax cases have already drawn IRS attention, we assume the returns, when filed, will be examined carefully. So accuracy and backup documentation is important.
So, once your back tax returns have been prepared, we know what your situation would have been had you filed on time. Sometimes we can ask for penalty abatement especially if you had refunds coming. And yes, that does happen.
Offer in Compromise
If you do owe back taxes, we take a look at an Offer in Compromise to ascertain whether the IRS might consider taking “pennies on the dollar.” The IRS has strict Offer in Compromise criteria that are well published. But there are highly advertised “Offer Mills.” Please see our posts on Roni Deutsch, JK Harris and Tax Master’s to see some of the problems compounding an Offer in Compromise. While the IRS has curtailed the number of acceptable Offers in Compromise, many “offer mills” prey on the public’s perception that this is a sure thing, with few consequences. Only to find out, after large retainers are exhausted, that they don’t meet IRS criteria for this technique. So now the taxpayer has both the IRS and a predatory heartless tax “offer mill” to deal with.
But an “Offer in Compromise” can be a good tool. Spending a few dollars on preliminary investigation can be warranted. At first, just to check if you fit the well published IRS criteria.
Installment Agreements
Once the back tax amounts due are whittled down, we help you figure out how to pay it. Sometimes the refunds from one year help pay the taxes due in another. Often, the IRS will accept an Installment Agreement. But other factors have to be considered, like will you be able to meet future tax obligations during the Installment Agreement?
We’re a Wilmington NC CPA firm that takes on back tax cases. We try to be empathetic, comprehensive and proactive as your tax advocate. Sometimes folks just need a helping hand through a tough situation. Read any of our posts to get a feel for our expertise. Unlike some Wilmington NC CPA firms, we offer a free initial consult with a CPA tax accountant. Call us at (910) 399-2705.
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