Unfiled Tax Returns and the IRS Statute of Limitations

Life activities can cause filing your tax returns to become a lesser priority resulting in non-filings to occur. If you are in this situation, please note that if you meet filing requirements, you must still file your tax returns.

The filing requirements are based on your age, filing status type, and respective amounts of income. The IRS provides an active interview format on its website to help you determine if you need to file.

What Happens to My Tax Refund If I Do Not File Tax Returns?

To get a refund, you must file your tax returns. In addition, you must file the tax return within three years of the filing deadline to get the refund.

For example, if you have six years of unfiled taxes returns due, you may get refunds on the most recent three years and not for any of the others from years four through six. In contrast, if you only had the most recent two years on unfiled returns, you would be eligible for both years’ refunds.

Unfortunately, if you owe back taxes, the IRS is not limited to going back three years.

Non-Tax Return Filing Consequences

The only consequence you will suffer if you fail to file returns where refunds were due is to miss out on the refunds. Not to suggest taking this lightly since it could cause a significant loss. In contrast, if you owe a tax liability and do not file, you could now be subjected to IRS collection procedures, leading to severe consequences. This generally happens when you owe taxes and have not filed a tax return.

Income Tax Penalties and Interest – Late Filed Returns

Late Filing Penalty

The IRS typically charges penalties and interest when returns are filed late. The Failure to File Penalty is 5% of the unpaid taxes for each month or part of a month that a tax return is late. The Penalty won’t exceed 25% of your unpaid taxes. For instance, if you owe $2,000, the failure to file Penalty is $100 monthly, which can get up to $500. The Failure to File Penalty applies the first day you are late, along with interest starting to accrue. Even if you cannot pay the taxes owed, filing your tax return is usually the best option since late paying penalties accrue at a much lesser rate.

Late Payment Penalty

The Failure to Pay Penalty is 0.5% of the unpaid taxes for each month or part of a month the tax remains unpaid, which accrues at 1/10^th the rate of the late filing penalty. The Penalty has the same cap of 25% as the late filing penalty; however, it will take significantly longer to accrue to this amount. Like in the last example of a $2,000 tax debt, that’s $10 per month versus $100. In addition, If you filed your tax return on time as an individual and you have an approved payment plan, the Failure to Pay Penalty is reduced to 0.25% per month (or partial month) during your approved payment plan.

Interest

The IRS charges underpayment interest when you don’t pay your tax, penalties, additions to tax, or interest by the due date. IRS will continue to charge interest until you pay off the balance.

Substitute for Return (SFR)

When you file a tax return, the IRS often has third-party reported information to cross reference your return. Because of this, even though you don’t submit a tax return, the IRS may use what data it has to prepare a return for you. IRS relies on IRC § 6020(b) to file tax returns for delinquent taxpayers as part of the SFR program. Third-party information consists of:

• Employer W2s or 1099s
• Banking interest income
• Financial Brokerage Firm – Trading information – dividends, capital gains
• Equity Ownership K-1s
• Unemployment WG2
• Gambling Winnings W2c

If what is reflected shows you have tax filing requirements, the IRS may prepare a tax return on your behalf, which usually overstates the taxes you may owe. The IRS will not consider any credits or allowable expense deductions you may be entitled to, resulting in your owning significantly more in taxes or not receiving the refund you may be entitled to have if you had completed your tax return.

The SFR processing begins with the IRS sending out an information letter stating that they have not received tax returns for a particular year(s). The IRS will then propose a tax liability consisting of the SFR return’s tax assessment, associated penalties, and interest. The information will indicate that you have thirty days to respond by doing one of the following:

• Complete and send the applicable 1040 tax return and any other required forms.
• Sign off on the consent form in agreement with the terms.
• Provide a response indicating why you meet non-filing requirements or any other unique circumstances the IRS should consider on your case.

You have thirty days from the date in the Information Letter to respond. If you fail to respond within that timeline, the IRS will send a Statutory Notice of Deficiency, a 90-Day Letter. The purpose of this letter is to inform you that the IRS will assess the tax amount along with associated interest and penalties at the end of the 90 days from the notice’s date. You are also informed of your right to petition the US Tax Court during the 90 days. If there is no response during the 90 days, the IRS can now assess the tax amounts and engage its full-scale collection efforts for these due taxes. IRS collection efforts may include attaching liens and rights to your property. Eventually, the IRS may escalate collection efforts by placing levies on your bank accounts or garnishing your wages. The IRS could even seek to foreclose on your home. Calling a tax attorney may help alleviate the IRS collection efforts before they get out of hand.

Taxpayer Identity Theft Exposure from Not Filing Tax Returns

Unfortunately, more and more taxpayers are being exposed to identity theft. With this scam, someone uses your social security number, files a fake return, and has the refund sent to their bank account. Not filing your taxes increases your risk of this happening because you will quickly become aware that something has occurred when you file. The IRS will immediately reject a tax return if someone else has already filed under your social security number or has used one of your dependent’s social security numbers on their return, which you have attempted to use on your return.

Also, the IRS sends correspondence to the last known address on file, which usually comes from your most recently filed tax return. If you have moved and have not filed since, the IRS may be trying to reach you and cannot. It is up to you to notify the IRS of any address changes. Filing your taxes as soon as possible help minimize the risk of someone else being able to file on your behalf falsely.

When Should I File Back Taxes?

The IRS has specific rules on who must file taxes every year. As of 2022, you must file a tax return if you meet any of the following criteria:

• Your income is over $27,700, and you’re filing as married filing jointly or as a qualifying widower.
• Your income is over $20,800, and you’re filing as head of household.
• Your income is over $13,850, and you’re filing as single. If over the age of 65, the income threshold is $15,350.
• Your income is over $5, and you’re filing as married filing separately.
• You had self-employment net earnings of at least $400.
• You made more than $108.28 from a church or church organization.
• You owe the alternative minimum tax.
• You owe an early withdrawal penalty from an IRA or 401(k).
• You owe household employment taxes.
• You owe Social Security or Medicare tax on tips you didn’t report to your employer or that your employer didn’t already take out of your pay.
• You received distributions from a health savings account, Archer Medical Savings Account, or Medicare Advantage MSA.
• You owe taxes on an IRA, health savings account, or other tax-favored account.
• You owe recapture taxes.
• Advance payments of the premium tax credit were made for you, your spouse, or a dependent who got health coverage through the insurance marketplace.
• You owe uncollected Social Security, Medicare, or railroad retirement tax on tips you reported to your employer or group-term life insurance and additional taxes on health savings accounts.

The rules are different if you are being claimed to be dependent on someone else’s return.

In addition, the income filing thresholds change every year. You must look at the filing requirement for the year you are filing for.

Even If I Am Not Required to File, Should I Still File?

Before you decide not to, you will want to consider whether, by filing a return, you could be getting money back from:

• You had federal income withheld from your pay.
• You made estimated tax payments.
• You may qualify to claim tax credits like

Do All Missing Tax Returns Have to Be Filed?

Suppose you have some years of unfiled returns and want to get your account caught up with the IRS. It may be that you do not need to file for some of the years in which you missed a return. For example, let’s say your filing status is single, and you have not had any tax returns over the last six years.

In 2017, your income was $30,000. In 2018, your income was $3,000. In 2019, your income was $32,000. In 2020, your income was $6,500. In 2021, your income was $27000. In 2022 your income was 8,500. You did not have any special taxes that could trigger a reporting requirement, and you did not have any self-employment income.

For 2017, 2019 & 2021, your income exceeded the filing threshold; therefore, returns for each year must be filed. However, in 2018, 2020, and 2022, your income was under the threshold resulting in not having to file returns for those years. However, before not filing for those years, you want to ensure you are not missing out on some benefit from doing so.

Even If I Am Not Required to File, Should I Still File?

Before you decide not to, you will want to consider whether, by filing a return, you could be getting money back from:

• You had federal income withheld from your pay.
• You made estimated tax payments.
• You may qualify to claim tax credits like:

It may be prudent to at least go through the mechanics of preparing a return to see if you are eligible for any of these credits.

Does the IRS Have a Statute of Limitations on Unfiled Tax Returns?

The IRS has no statute of limitations on an unfiled return. The IRS is not limited to when they can go back and prepare Substitute for Returns. Even if you had not filed in the last 25 years, the IRS could go back and make tax assessments on any years in which taxes could be due. However, several separate statutes involving assessment, refunds, and collections can be confusing. To help better understand these types of statutes, here is a breakdown of them.

IRS Assessment Statute Limitation

Assessment Statutes of limitations generally limit the time the IRS must make tax assessments within three years after a return is due or filed, whichever is later. That date is also called the Assessment Statute Expiration Date (ASED).

However, the ASED can be extended under the following circumstances:

• Failing to file your tax return. IRS can assess tax under the Substitute for Return (SFR) program. If you voluntarily fail to file your tax and the IRS has enough information to file one for you, it may elect to proceed with the filing. The standard three-year ASED does not adhere to SFRs allowing the IRS to assess tax and additional tax at any time. Subsequently, if you elect to file your tax return, the normal ASED three-year time limitation is now in place.
• Sign a statutory waiver to extend ASED. You can agree to allow the IRS to extend the assessment time by signing a statutory waiver or extension agreement. If the IRS proposes a waiver to extend the ASED, you can negotiate the proposed time limitation to assess or refuse to sign the waiver. It may be prudent to speak to a tax professional before doing so.
• Tax Omissions of more than 25% of your gross income from a tax return. If you have such an omission, the IRS can assess additional tax increases from three to six years from the date your tax return was filed.
• If you file a false or fraudulent return intending to evade tax, the IRS has unlimited time to assess tax.

The IRS cannot assess tax after the time limitation period for assessment has expired.

IRS Tax Collection Statute Expiration Date – Statute of Limitations

The Collection Statute Expiration Date (CSED) provides that the IRS has ten years from the tax assessment date to collect to collect or else it becomes unenforceable. Some occurrences can toll the statute, such as applying for specific tax resolution plans or appealing assessments. The CSED plays a vital role how determining how to deal with the IRS. Often it can be beneficial to inquire with a tax attorney on how the CSED impacts any potential IRS negotiations.

IRS Tax Refunds Statute of Limitations

The refund statute of limitations for claiming a refund is three years after the filing deadline.

The IRS Regulations Sec. 6511(a) and Regs. Sec. 301.6511(a)-1(a) provides that you are eligible to claim a refund or credit if requested within three years from the date of filing the tax return or two years from the date the tax was paid, whichever is later. Please note that a tax return paid or filed paid before the last day allotted for its filing or payment (not regarding extensions filed) is considered paid or filed on that last day.

For example, let’s say that you file a tax return on April 15, 2020, and you owe taxes. You pay the tax bill on August 23, 2020. Eventually, you realize you made a mistake and plan to amend your tax return to claim a refund. Three years from the filing date is April 15, 2023, and two years from the payment date is August 23, 2020. You can claim a refund up to the latter date.

When you did not file a return, and there were tax payments made, you must file for a credit or refund of an overpayment within two years from when the tax was paid. Typically, this could occur for w2 income tax withholdings from employers or self-employed individuals who made larger than the required estimated payments. In the absence of a tax return being filed, one would take two years from the time the taxes were paid to file a claim for a refund.

How Do I Handle My Unfiled Tax Returns?

Getting professional tax help with your unfiled returns may be the best way to properly get through them as soon as possible in the most efficient manner. Tax professionals already have the right tax programs, understand the appropriate filing rules, and can help you avert unpleasant IRS repercussions.

On the other hand, if you choose to file your back taxes on your own, here are some procedures you may want to consider:

• Reach out to the IRS to determine your status with them to see if an SFR has been filed and if your case has been assigned to IRS personnel.
• Go online and set up an account with IRS to pull your wage and income reports and confirm any taxes paid. An IRS representative can also retrieve this for you. In addition, seeing what the IRS has listed may help get year-end information from sources and confirm.
• Pull all applicable year-end tax documents such as investment information, W2s, 1099s, and bank statements.
• Research each year in question to ensure you obtain available credits and allowable deductions you may be entitled to.
• Because the tax code changes frequently, use the appropriate year’s tax form to ensure correct deductions and credits are applied.

How Many Years of Back Taxes Do I Need to File?

The IRS generally follows its policy 5-133, which provides a general rule that taxpayers must file six years of back tax returns to be in good standing with the IRS. Even so, the IRS can go back more than six years in certain instances. For example, you must complete all four years’ worth if you have four years of unfiled tax returns. If you have nine years of unfiled tax returns, you must complete the most recent six years of returns.

There is no statute of limitations on unfiled returns, so the IRS can differ from the six-year rule if large tax amounts are owed beyond this time frame or if they believe you may have committed tax fraud.

This is why working with someone with experience dealing with unfiled returns is essential. To protect yourself, ensure you or your tax preparer understands IRS policy 5-133 dealing with delinquent returns. This rule maintains that, in general, a taxpayer must only file six years of back tax returns to be in good standing with the IRS.

How to Address Past Due Taxes from Filed Returns

Getting your past tax returns filed may leave you with a large tax debt you cannot afford to pay. Depending upon your circumstances, there are a variety of IRS tax resolution options you may qualify for, such as:

• The installment plan allows you to make monthly payments on your tax debt until wholly paid off before the Collection Statute runs out.
• A Partial Payment Installment Agreement (PPIA) is a monthly payment plan option for those who cannot pay the total balance due by the end of the Collection Statute. Financial determination is completed for eligibility. A PPIA can prevent the IRS from taking further collection action, such as levies and seizures. PPIA does not prevent IRS from initiating liens.
• Offer in Compromise allows you to settle your tax debt for less than the total amount you owe. It may be a legitimate option if you can’t pay your entire tax liability or if doing so creates a financial hardship.
• Penalty Abatement. There may be some penalties eligible for abatement.
• Currently Not Collectible status: If you can establish that you can’t pay your taxes and basic living expenses, the IRS may place your account in Currently Not Collectible (CNC) status. Under CNC, you will not have to make tax payments; however, interest and penalties could continue to accrue. You will remain in this status until your situation improves or you have reached the CSED and your tax liability is cleared.

When you hire a multi-licensed tax attorney CPA EA, you are getting expert tax return preparation capabilities sets and equipping yourself with the best possible means of optimally dealing with any surrounding tax issues. Dealing independently with the IRS can often be a very stressful experience resulting in an unfavorable outcome. A tax attorney CPA alleviates this burden from you. They understand how to navigate the complexities of the IRS tax code, deal directly with the IRS, and can determine the best resolution options for your case. They can get the best results for you. This is where Harmon Tax Resolution, LLC – the tax law firm dedicated to helping you with your IRS issues.

Get Trusted Professional Tax Help with Unfiled Tax Returns and IRS Tax Debt Resolution

To ensure that you align yourself with the best possible tax resolution outcome, have an experienced tax professional provide expert guidance to get you there. Call today (772-418-0949), or complete an online inquiry form for a free consultation with experienced IRS Resolution Tax Attorney-CPA-EA, Will Harmon of Harmon Tax Resolution, LLC. He will handle your IRS tax issue so you can put this behind you and do what matters most.

For additional information, please see the following blog articles:

• “The IRS May Prepare A Substitute for Return in Place of an Unfiled Tax Return“
• “How to Deal with Back Taxes and What to Do About Unfiled Tax Returns“
• “Optimal Tax Return Preparation Services“

Tax Attorney-CPA-IRS EA Will Harmon of Harmon Tax Resolution is here, so you don’t have to face the IRS alone. He will help you fix, submit, and correct your unfiled returns. You will be assured of getting the absolute best resolution for your situation. To learn more, contact us today for your free consultation.

If you receive a letter from the IRS saying that you owe additional taxes, it is important not to panic. It may be a frightening situation, but there are things you can do to settle your tax debt and get back on the good side of the IRS.

Taxpayers do have options when resolving tax disputes and paying additional taxes due, and simply knowing what those options are can set your mind at ease.

As an expert Tax Resolution Firm, we encourage all readers facing a tax problem, whether it’s the feds or the state, to contact us for a free consultation.

Here are three strategies you can use to resolve your tax debt and get on with the rest of your life. Not all these options will be right for everyone, but it is important to be an informed taxpayer.

1. Review the Amount Owed and Your Tax Return in Question

If the IRS says you owe money, you should not simply assume they are right. The tax agency does make mistakes (a lot), as do tax preparers and ordinary taxpayers.

Whether you filed your taxes on your own or hired someone else to do it for you, it is important to examine your return and compare what you find with what the IRS is claiming. It pays to seek professional help for this tax review, even if you originally filed your own taxes. A professional with IRS experience may be able to uncover errors and inconsistencies you would have missed on your own, and that could end up saving you money.

There is no guarantee this review will eliminate the extra taxes the IRS says you owe, but it never hurts to be sure. There have been many cases in which taxpayers who thought they owed money to the IRS ended up owing nothing – or even being due for a refund from the IRS.

2. Set Up a Payment Plan

Getting a notice of additional tax due from the IRS is frightening, especially if you cannot afford to pay what the agency says you owe. Keep in mind, however, that you do not necessarily have to pay the bill all at once.

The IRS is often willing to set up payment plans with taxpayers, and those payment plans could make paying what you owe easier and less stressful. Once again, it is a good idea to seek professional help and guidance here – the IRS can drive a hard bargain, and you do not want to end up with a payment plan you cannot afford and wind up defaulting on it.

If you fall behind on the payment plan you agreed to, you could be subject to additional enforcement action, including the tax agency garnering your paycheck or seizing funds from your bank accounts. Getting the help of a tax resolution professional upfront can help you avoid these serious consequences.

3. Explore an Offer in Compromise Settlement

If you are truly unable to pay the money the IRS claims you owe, you may be able to work out a (much) smaller lump sum payment. The IRS may not advertise this program, but they are often willing to work with taxpayers by accepting lesser amounts, especially if those taxpayers have little in the way of equity in assets and a limited income. Sometimes these settlements can be for a fraction of what’s owed if you qualify. We offer a free no-obligation consultation to find out if you qualify.

If you plan to explore this last option, it is critical that you work with a tax resolution expert. An offer in compromise can be extremely complicated, with legalese and language that can be difficult to understand. You do not want to make a misstep here, and you want to ensure that you are only paying the lowest amount, allowed by law, in the settlement of your tax bill.

Few things are as frightening as getting a letter from the IRS. That official-looking letterhead is bad enough, but what the letter says is even worse. If you receive such a letter, you need to take positive steps right away. Ignoring the situation will make it worse and it won’t go away, and the sooner you start exploring your tax resolution options the better off you will be.

If you want the help of an expert tax resolution professional who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain all your options to permanently resolve your tax problem.

Because you’re bombarded with confusing claims, simply bad information, and near worthless solutions. How do you find a qualified, competent tax resolution specialist? How do you make sure you’re not getting ripped off?

You may find this information useful to help make an informed, intelligent decision.

RIP-OFF #1 Overpromising Results

If someone guarantees to settle your tax debt for a certain amount through an offer in compromise or promises you a certain monthly payment amount, that should be a “red- flag” to you. That’s like you going into a trial and your lawyer telling you he knows which way the jury is going to rule. They don’t and can’t know ahead of time. It’s the same with the IRS. The IRS is the final arbiter, they have the last word. A reputable firm will conduct a thorough analysis of your case, before they ever agree to take you on as a client, to determine what’s more likely than not to resolve your matter based on (their years, the number of cases, etc.) historical experience with cases such as yours.

RIP-OFF #2 Bait and Switch

Beware of firms that quote seemingly low fees for a particular service just to get you in the door then turn around and inform you of additional services needed, and want MORE money from you, to complete your case. A reputable firm will let you know at the onset, even before becoming a client, what the total fees are to achieve permanent resolution. Some firms will also bill you by the hour and nickel and dime you for copies, faxes, time on hold with the IRS, phone calls, postage, etc. You’ll never know what it will cost you to achieve a final resolution. Most reputable tax resolution specialists work on a fixed or flat fee basis, so you’ll know, “all-in” what you’re going to pay to achieve permanent resolution.

RIP-OFF #3 Salesperson vs. CPA, EA or Attorney

You should always ask the person you are speaking with on the initial phone call or meeting how many cases they have successfully settled. The answer may surprise you, as only a CPA, Enrolled Agent or an Attorney can represent you before the IRS. At Harmon Tax Resolution our IRS tax resolution specialist has all three credentials to ensure complete coverage of your issue. If you’ve called an “800” number 10 states away, chances are you are speaking to a salesperson who makes a large commission for signing you up and has no direct bearing on your case. You want to make sure you are only speaking with a licensed professional, who is also a tax resolution specialist, regarding your situation and possible remedies.

RIP-OFF #4 Large Upfront Fees

Beware of firms requiring you to pay the entire amount of the fee upfront. These are generally the large national Tax Resolution firms you hear advertising on the radio and on late-night TV. They’re hungry for your money to continue to pay for their expensive advertising without regard to completing your case. It’s like a giant Ponzi scheme. A reputable tax resolution specialist will usually require a reasonable deposit to start your case and will allow you to pay them over time, usually in fixed monthly payments that your budget can handle.

Our firm specializes in providing affordable solutions to individuals and businesses alike, who for whatever reason, find themselves at odds with the IRS or state taxing agencies. Our experienced staff will represent you in front of the IRS, allowing you to continue on with your life. Generally, you will never have to speak or meet with the IRS once we’re retained.

SOLUTIONS MAY INCLUDE IF YOU QUALIFY:

…Negotiating an Offer in Compromise for a discounted settlement. We’ll offer a payment of a lower amount and request a release of federal tax liens.

…Ask for an Appeal of the amount owed and request that the IRS re-examine your case in order to reduce the amount you owe.

…Request a reduction in penalties by presenting valid reasons for the removal of these penalties.

…Offering a monthly Payment Plan that is workable for you.

…Filing of Delinquent Tax Returns. You may still be able to file original tax returns for past years, usually reducing the tax, penalty, and interest owed.

…Audit Defense. We’ll represent you in an IRS audit or hearing, so you do not have to appear.

If you want an expert tax resolution specialist who’ll fight for you, and knows how to navigate the IRS maze, reach out to our firm TODAY and we’ll schedule a no-obligation, confidential consultation to explain all your options in detail and give you a fee quote to permanently resolve your tax problem. We’ll even work out an affordable payment plan for our fees. Call (772) 418-0949. You have nothing to lose. The call is free, the consultation is free so you can sleep better tonight.

To Your Success,

William Harmon, Esq., CPA, EA
IRS Tax Resolution Specialist

Myth #1: All tax professionals have basically the same training.

The Truth: Not all tax professionals have the same training. A Tax Resolution Specialist, for example, undergoes rigorous comprehensive training and participates in annual continuing education courses specifically dealing with IRS problems. They have access to up-to-date material on an ongoing basis.

Myth #2: All attorneys and accountants have experience with the IRS.

The Truth: Only a small percentage of lawyers and accountants have any experience in dealing with the IRS. Some attorneys simply prepare documents and many accountants deal only with accounting matters.

Myth #3: Former IRS employees have special connections that give them an inside edge that other tax professionals do not have.

The Truth: All IRS problems are resolved based on the facts of the case, the applicable law, and the skill of the Tax Resolution Professional. Personal connections simply do not come into play.

Myth #4: The large national tax resolution firms have an advantage over local Tax Resolution professionals.

The Truth: National firms have no advantage over local Tax Resolution Professionals and often are at a disadvantage. A local Tax Resolution Professional is in a unique position of understanding not only the local economy but also any other issues that may affect taxpayers living in his/her area.

Myth #5: Tax professionals listed on Internet directories are carefully screened for qualifications.

The Truth: Most Internet directories are nothing more than another advertising media. Sometimes, the only qualification required in order to be listed is the ability to pay big bucks for an “exclusive listing.”

Myth #6: A tax professional who can guarantee results must be better than those who do not guarantee results.

The Truth: No legitimate Tax Resolution Professional can guarantee results. It is the IRS that ultimately decides the outcome of your case. It is only by choosing a skilled and experienced Tax Resolution Professional that you can enhance your chances of a positive result.

You may find this information useful to help make an informed, intelligent decision.

RIP-OFF #1 Overpromising Results

If someone guarantees to settle your tax debt for a certain amount through an offer in compromise or promises you a certain monthly payment amount, that should be a “red- flag” to you. That’s like you going into a trial and your lawyer telling you he knows which way the jury is going to rule. They don’t and can’t know ahead of time. It’s the same with the IRS. The IRS is the final arbiter, they have the last word. A reputable firm will conduct a thorough analysis of your case, before they ever agree to take you on as a client, to determine what’s more likely than not to resolve your matter based on (their years, the number of cases, etc.) historical experience with cases such as yours.

RIP-OFF #2 Bait and Switch

Beware of firms that quote seemingly low fees for a particular service just to get you in the door then turn around and inform you of additional services needed, and want MORE money from you, to complete your case. A reputable firm will let you know at the onset, even before becoming a client, what the total fees are to achieve permanent resolution. Some firms will also bill you by the hour and nickel and dime you for copies, faxes, time on hold with the IRS, phone calls, postage, etc. You’ll never know what it will cost you to achieve a final resolution. Most reputable tax resolution specialists work on a fixed or flat fee basis, so you’ll know, “all-in” what you’re going to pay to achieve permanent resolution.

RIP-OFF #3 Salesperson vs. CPA, EA, or Attorney

You should always ask the person you are speaking with on the initial phone call or meeting how many cases they have successfully settled. The answer may surprise you, as only a CPA, Enrolled Agent or an Attorney can represent you before the IRS. If you’ve called an “800” number 10 states away, chances are you are speaking to a salesperson who makes a large commission for signing you up and has no direct bearing on your case. You want to make sure you are only speaking with a licensed professional, who is also a tax resolution specialist, regarding your situation and possible remedies.

RIP-OFF #4 Large Upfront Fees

Beware of firms requiring you to pay the entire amount of the fee upfront. These are generally the large national Tax Resolution firms you hear advertising on the radio and on late-night TV. They’re hungry for your money to continue to pay for their expensive advertising without regard to completing your case. It’s like a giant Ponzi scheme. A reputable tax resolution specialist will usually require a reasonable deposit to start your case and will allow you to pay them over time, usually in fixed monthly payments that your budget can handle.

If you have any additional questions or would like more information, please feel free to reach out to me.

I proudly wore my CPA and Enrolled Agent hat while I labored through a busy tax season. With April 18^th come and gone, there is now time to reflect on how going forward I can improve the processes and communications mediums of my firm. There’s also a lot to reflect upon regarding how to help my clients maximize their taxable position for the 2022 tax year filing. Some clients ponder whether it is necessary to worry about this now since it will be a while before we go through this tax preparation exercise again. That response is a good segue for me to point out that the most effective tax planning is done as early as possible since it allows for one to be proactive in choosing what, when, and how to engage in certain taxable events thereby allowing for the ability to choose from a greater amount of potential taxable outcomes versus waiting until tax prep time rolls around which in turn significantly limits one’s options to choose a taxable alternative.

Since every taxpayer has a unique situation requiring specific actions when considering how to maximize their own taxable situation, it would not be prudent to try to list them here. However, there is a simple universal repetitive task that taxpayers could utilize to help them become more proactive with their tax health (I was tempted to use the word “prophylactic” since having a poor tax situation can lead to bad health). The task is simply to just log into your online IRS tax account at least every other month to confirm that all data listed within is correct and to make you aware of any IRS notices of action. If one does not have an account with the IRS, it is easy to set one up. Just go to “IRS Gov Create Account” and follow the instructions.

What are the advantages of this? For starters, this is a great and timely way to make sure the most recent tax return compares to what IRS has listed. This will avoid many problems, especially the next item. One will be immediately aware of any IRS notices or actions allowing for a timely response, and if in the wrong an opportunity to lessen the accrual of penalties and interest. Also, since certain allowable responses are time-oriented, it is crucial to be able to respond within the allowable time otherwise one may not get to use them. As a tax attorney, I have dealt with several clients who came for help in response to their IRS notices and were not aware of other IRS notices sent. This resulted in more complexity and additional cost to the clients all of which could have been avoided simply had they been proactively checking their IRS accounts.

There are many additional reasons to perform routine checks on your IRS account. Here are some relative points taken from a recently posted article on the IRS website, “ Steps to Take Now to Get a Jump on Your Taxes“

Use online account to securely access the latest information available about your federal tax account and see information from your most recently filed tax return on IRS.gov.

You can:

• View the amounts of the Economic Impact Payments you received
• Access Child Tax Credit Update portal for information about advance Child Tax Credit payments
• View key data from your most recent tax return and access additional records and transcripts
• View details of your payment plan if you have one
• View 5 years of payment history and any pending or scheduled payments

Organized tax records make preparing a complete and accurate tax return easier. It helps you avoid errors that lead to processing delays that slow your refund and may also help you find overlooked deductions or credits.

Also another good tax prepartion tax tip: Wait to file until you have your tax records including:

• Forms W-2 from your employer(s)
• Forms 1099 from banks, issuing agencies and other payers including unemployment compensation, dividends, distributions from a pension, annuity or retirement plan
• Form 1099-K, 1099-MISC, W-2 or other income statement if you worked in the gig economy
• Form 1099-INT if you were paid interest
• Other income documents and records of virtual currency transactions
• Form 1095-A, Health Insurance Marketplace Statement, to reconcile advance Premium Tax Credits for Marketplace coverage
• Letter 6419, 2021 Total Advance Child Tax Credit Payments to reconcile your advance Child Tax Credit payments
• Letter 6475, Your 2021 Economic Impact Payment, to determine whether you’re eligible to claim the Recovery Rebate Credit

This one is important! Notify the IRS if your address changes and notify the Social Security Administration of a legal name change. This will make sure that you are getting timely information from IRS.

I hope this helps someone to maintain good tax health. If there are any observations or questions, please feel free to reach out to me.