The number of Americans that do not file a tax return each year is growing. Each year a tax return goes unfilled creates more penalties and interest as well as puts the taxpayer in violation of federal tax laws. Furthermore, you can find a huge number of reasons why; stemming from individuals who think that the United States lacks the legitimate authority to levy as well as collect taxes, to people who just do not understand how to file a tax return or perhaps are unable to spend the taxes owed. Americans that owe the IRS a tax liability must take an organized and systematic strategy to rejoin the tax-paying and tax-filing society to make sure the tax headaches of theirs are lessened.
First step: Figuring what years need to be filed.
In the event you have not submitted a tax return “for a while”, you must exactly define “for a while”. In general, a person that has not filed tax return shipping “for a while” will have to file those tax returns within the preceding 6 years for which there was a filing requirement. Figuring out which of the past 6 tax years that have to be filed normally entails an evaluation as well as analysis of IRS transcript info to figure out for which tax years there was adequate income or even a few other taxable event needing the filing of a tax return. After that, you need to compare any private information you might need to the IRS transcript info for accuracy, also to check that all revenue and taxable transactions had been reported to the IRS.
Second step: Figuring out if the IRS filed an SFR on your behalf. (Substitute For Return)
One would think not filing would mean there is no tax return filed, but that is not the case. In certain instances, if the IRS has gathered adequate income information for a taxpayer from employers or contractors filing your W-2 or 1099’s W2; but doesn’t get a corresponding tax return, the IRS can file a tax return on behalf of the individual called a Substitute For Return (SFR). Basically, the IRS is going to use the revenue info it is on file for you, without the basic deductions and credits a taxpayer would normally receive. Typically, a Substitute For Return will have an additional 25% to 30% higher taxes owed compared to a taxpayer filing their own return.
Imagine having to pay on taxes that you would not have owed, just for not filing a tax return. The first step to remove or replace a Substitute For Return is to contact the IRS and find out which years if any are Substitute For Return tax returns and refile the years in question. In many cases just refiling your back-tax returns can eliminate some or all your back taxes due.
Third step: – Getting compliant with the IRS
Once you have gone through the process of contacting the IRS or hire a tax resolution firm to contact the IRS on your behalf the hardest part begins. Getting compliance seems to be the biggest challenge most taxpayers face. Knowing that the IRS is looking for multiple years and seeing the penalties and interest that is accruing many people want to stick their heads in the sand. Though people want to hide from a tax debt; the bad part about that is the interest in penalties will keep accruing and the tax debt is only growing every day. The most important thing to remember regarding taxes is; that it its not illegal to owe the IRS, but it is illegal not to file your tax returns. This step may be the most challenging and we usually recommend hiring a tax resolution firm to assist you in becoming compliant.
Last step: – Protect your assets
Now that your returns are completed and ready to send to the IRS you can take a deep breath, but only for a second. The IRS can take anywhere from two to twelve weeks to process and calculate your tax debt. Nevertheless, the moment your returns are received the clock starts ticking on collections actions. Generally, the IRS will start by sending a letter informing you of the total amount owed which includes penalties and interest, and even worse interest on those penalties. The time to act is the day that letter comes. The IRS is the largest collection agency in the world and has the power to take your paycheck, your home your driver’s license even your passport.
There are many options for tax relief and tax resolution and hiring a tax resolution firm can help you navigate the rough waters of tax relief. There is an old saying “a person who represents themselves in court, has a fool for a client”. Protection and resolution are paramount to a successful tax negotiation. Finding a highly rated and experienced tax resolution firm will assist you to permanently fix a back-tax issue and bring the peace of mind we all deserve.