Back Tax Returns

Back Tax Returns and Back Taxes

According to the IRS, some 10 million taxpayers fail to file their federal income tax returns each year. Unfortunately, that results in huge amounts of back taxes and penalties.

Back Tax ReturnsThe reasons why people don’t file back tax returns are numerous —some taxpayers are procrastinators; some don’t comprehend the minimum filing requirement (Hint: All should file – even if not necessary); while others purposefully don’t file in a foolish attempt to evade their responsibility to report their income and pay their fair tax liability. Regardless of the reason why people don’t file, the IRS identifies all of these taxpayers as “non-filers.”

Taxpayers who allow a ‘non-filing’ status to continue without filing back tax returns can expect severe consequences. In some cases, a taxpayer may even suffer criminal tax prosecution for failure to file back tax returns. Non-filers can resolved their IRS problems by contacting a Tax Resolution Lawyer who will contact the IRS on the taxpayer’s behalf and voluntarily addresses the problem head on.

New Health Care Legislation will erase most American’s Typical Tax Refunds

In 2012-2013, —1 of every 6 Americans have some sort of tax problem with the IRS. Our Tax lawyers are looking ahead at the government’s new tax increases and Patient Protection and Affordable Care Act (sometimes called “Obamacare”) and suspect that more and more Americans will be having have Tax Problems with the IRS than ever before. Federal legislation will demand that all Americans, not covered by Medicare or an approved employer’s health care plan, must purchase an approved health care insurance plan or pay the minimum fine for non-compliance. The insurance “exchanges” come on-line January 1, 2014 and by 2016, every American will be compelled to either (1) pay for health care insurance averaging $20,000 per year (according to cnsnews) , or (2) pay to the government via the IRS a fine that will average $1,737 erasing most American’s average tax refund (according to ABC news). The actual IRS legislation can be viewed here (PDF – see page 56).

Upshot? More and more Americans are going to have to come to terms that the IRS will be as important a creditor as their landlord or mortgage company.

What Should You Do if you have One or More Years of Back Tax Returns?

From the vantage point of our Tax Resolution Lawyers here at Vincent W. Davis and Associates, we strongly recommend that anyone who is working or receiving income or other compensation should file a tax return —even if your income comes in “technically” under the minimum filing requirements. It is just good common sense to cover your bases when dealing with the government. If your income is under the threshold for filing, it might take 15 minutes once a year to file a form that states clearly that your situation falls under the filing threshold. On the other hand, if you earned more than the minimum filing requirement and failed to submit one or more back tax returns, you should call us immediately. We’ll wager that you will sleep better tonight! For the majority of ‘non-filers, your income exceeds the threshold, but because of the horrible, ongoing recession, your finances, being out of work, too busy, or whatever, you missed filing one tax return, then the following year another, and so it went… Now you are under incredible stress and anxiety and have no idea if you owe the government taxes or not. No matter! Even if it were to turn out that the IRS owes you money, by not filing back tax returns you are asking for trouble!

Do you have One or More Back Tax Returns that were never filed?

Filing a tax return can often be a complex and tedious task. For those with multiple unfiled tax returns, we are pretty certain that you find yourselves so overwhelmed with stress, guilt and anxiety that you have no idea how or where to even begin to get yourself in compliance. Please… don’t be embarrassed! We’ve heard it all and it is only going to become more common. Some of our employees have been there. We totally get it!

Frankly, we, more than most, have a clear and unobstructed view of what’s going on and we totally understand that it is not difficult to get caught up in a compounding downward spiral with the IRS. You should not feel like a “flake” if this is your current dilemma. The IRS, if not every American’s biggest creditor, soon will be. When funds get tight what can we do? Life happens! Remember the statistics —1 in 6 Americans are now having difficulties meeting the IRS’s demands —and that number is climbing. So take a deep breath and give us a call. We’ll get started immediately to solve your problem. It’s no big deal here. This is what we do.

Are you a ‘non-filer’ – Do you have Back Tax Returns needing to be filed?

If you are here visiting our site, and you find yourself in such an awful and overwhelming situation, just pick up the phone and give us a call. Not only will you feel that you’ve finally taken that “first step,” you will have done exactly that. Until you just get started, you’ll be looking over your shoulder. It just isn’t worth the stress to your health and mental well-being not to deal with this now. Moreover, you might be surprised at how simple the process can be when you get a professional tax attorney and other tax professionals on your side. You must know —that putting this off— that doing nothing, will not “end well.” Call us. We’d like to add you to our list of client testimonials.

Do you think that the IRS is not aware that you have unfiled, back tax returns?

If you are thinking because the mail box is not full of scary letters, or your phone is not ringing, that the IRS isn’t aware of your non-filing status. Take it from the experts – The IRS knows! If you have unfiled, back tax returns, you don’t have to go this alone. The best way to stay out of trouble with the IRS is get some help and get those returns put together and filed as soon as possible. There’s nothing embarrassing here. The tax code is virtually undecipherable. You’d be surprised at the clients that come to us, factory workers-to-doctors; from all walks of life, who simply get caught with past due tax returns. We are here to help you straighten it out. While you might feel overwhelmed, it is not all that complicated for us since we do this day-in and day-out. If you have to cart several shoe boxes of receipts to our offices, you won’t be the first. Please, put them in your car and come down to one of our seven offices or have UPS get them to us. We too are frustrated by our overly-complex tax system and the hassle is causes for all of us. We will dig in, make sense of your situation and get you in the IRS’s good graces in short order. And don’t worry, our services are affordable.

Turning Anxiety and Dread into Joy. It happens…

Many clients who have years of unfiled, back tax returns will share with us that they have been living in a state of debilitating fear and anxiety for years. Not solely because of one or several year’s unfiled returns, but for the fear that they might owe tens of thousands of dollars that they simply can not come up with if the compiled tax returns show that they owe big bucks. Surprisingly, after we compile many clients back tax returns, a large percentage of our anxious clients actually end up being OWED long overdue and significant refunds (some averaging $3,000+ per year for 2, 3, or even 4 back tax returns). They are shocked! Pleasantly so.

All of those years of unfounded & unnecessary dread, and it often turns out that the IRS was sitting on cash money owed to our clients! Considering the deductions available for mortgage interest, dependents, etc., such “happy endings” are more common-place than you might think. Our clients will often joke about all the sleepless nights they suffered —and then we prepare their past tax returns and discover that there are minimal taxes, no taxes, or several thousands of dollars of tax refunds awaiting them! You can literally see the stress drain from our clients faces. Thereafter we then end up filing their returns for them from that point forward so they’ll never be caught up in that fear and panic ever again.

After assisting you in filing one or several back tax returns, you should experience no further harassment or collection issues with the IRS, as they will likely drop you from ever being targeted again. Our tax resolution lawyers and other tax professionals will remedy existing troubles and attempt to head off future IRS issues for you. We can even prepare and electronically file future tax returns for you. You will be pleasantly surprised that we are as cost-effective as many seasonal tax preparers, though you will enjoy the attorney-client privilege when you have a tax lawyer prepare your tax returns. Since we will have all of your recent prior years’ returns, filing your future returns will be very straight-forward and affordable. Moreover, it can often be accomplished with just a phone call and a few emails back and forth – no need to drive to our offices in the coming years.

Substitute for Returns – These can access a tax liability that you may not deserve!

The state tax agencies and the IRS will create a Substitute For Returns if you fail to file required tax returns. The authority is granted to the Internal Revenue Service by IRC §6020(b) which authorizes the IRS to prepare an individual income tax return on behalf of the taxpayer. In most cases, the Automated Substitute for Return system is used to evaluate the IRS Master File information about the taxpayer, and prepare an SFR for a wage earner or taxpayer without other unresolved taxpayer delinquent accounts. If you have unfiled back tax returns, the state or the IRS may create, on your behalf, a tax return that may have no bearing on the wages you did or did not earn for a particular year. We would strongly suggest that you do not allow this to happen. Once in place, unless contested, a tax liability will be established for you determined by your past history or from a table of what like employment earns for a particular job description or profession.

A Real Life example of a Substitute Return

One of our outside vendors, an IT and Internet guy, who works for our law firm shared an interesting story. He used to be a Real Estate Broker in California. In 1989 he took a whole year off to rebuild his mother-in-law’s home in the Los Angeles suburb of La Mirada. He had NO income for the entire year. He woke up early, went to bed late, completely rebuilt a house from foundation to roof: plumbing, electrical, doors, windows, drywall, stucco, hardscape, landscape, doubled the size of the home, added a guest house and new garage on the deep lot so his wife’s mother could have a get some rental income to offset her modest expenses and then retire. He totally enjoyed the year away from work. He had no income, no commissions, and —he thought— no reason to file a state or federal income tax return. Technically he was correct. Practically he made an idiotic mistake.

His Horror story should be a lesson – The IRS left him alone, but the state of California, having a record that he was a licensed California Real Estate Broker (who did not put his license on “inactive status” – and why should he have on a 4-year recurring license schedule?), decided to compile a tax return on his behalf for the year he did not file. The state’s reasoning was that a licensed R. E. broker, according to their average income tables, would earn a minimum average income of X-dollars. If the state sent letters threatening a lien or levy to his old address is not known as he had moved into the property he was rebuilding for that year. They may have.

Gee wiz, I’m $400 under the $9,500 minimum,
so I’m not going to file! —Rethink that strategy: FILE ANYWAY!

Didn’t need to file story continued – Two years later the State levied against a $100,000 CD that our IT geek and his wife had saved for years to squirrel-away for their retirement at a local Wells Fargo Bank. The state calculated his tax liability for the year where he “failed to file” a tax return at $40,000. Our IT guy laments that it took him more than 8 weeks and several long days at the state tax offices in Santa Ana, CA to have the funds finally returned. Lost interest earnings and early CD liquidation fees and penalties were never reimbursed. It would have taken the intervention of a tax lawyer with a handful of notarized afidavits from witnesses to prove he was not “selling or managing real estate!” If he had not had 3 bulging scrapbooks of almost-daily pictures of he and his wife working on a home-building project for 14 uninterrupted months (the “evidence” that the state auditors finally agreed proved his story that he was not otherwise employed) he might have lost the fight. The state had no evidence that he was working in real estate; no 1099’s from escrow companies, no W-2’s —absolutely nothing! “Guilty until proved on year-long sabbatical!” If not for the camera they used to catalog their project on a daily basis that imprinted the date on each and every picture of the personal building project he would have surely have had to hire a tax attorney to intervene. 15 minutes to file a “no earnings” return would have prevented the whole mess.

Your earnings short of the minimums for reporting? —Report ANYWAY!

Our IT guy’s story worked out OK – will yours? If you think that you do not owe the IRS or the state an income tax filing because you did not rise to the level of their reporting levels – FILE A TAX RETURN anyway. The tax authorities are “in business” to collect taxes and they are very good at their work in this regard. Weeks of inconvenience and retrieving funds that you may need just to survive can be averted by covering your bases when dealing with the government. Do not assume that the state nor the IRS will understand that you were unemployed, took a long vacation, or were sidelined by a serious medical condition for a particular tax reporting period. FILE a tax return- even if it is not required. (IRS Minimum Filing Guide)

Attorney Client Privilege is a bonus of working with a Tax Lawyer

“Attorney Client Privilege” – is a long-cherished legal principle that protects the confidentiality of conversations that attorneys and their employees have with the attorney’s clients. This privilege means that the information you share with your attorney cannot be repeated nor revealed to third parties, including state tax authorities, the IRS, or even a court.

Though some recent legislation offers some level of confidentiality to the communications individuals may have with other non-attorney tax professionals, that minimal privilege applies only in contexts that do not involve potential criminal offenses. In Tax cases, almost every “overlook or mistake” —premeditated or not, rises to fit within a criminal complaint. Fortunately for taxpayers in trouble and who share their various dilemmas in confidence can rest assured that their attorneys and staff are legally exempt from being forced to provide information to third parties or to testify against you. To the contrary, there are numerous documented instances where trusted CPA’s and other tax professionals have reported “suspected” criminal behavior to the IRS, and there even more instances where CPA’s and tax preparers have been subpoenaed to testify against their clients in court.

Attorney Client Privilege is sought by clients with undisclosed offshore accounts

Do you have an offshore bank account?With all the talk of undisclosed foreign bank accounts and coming clean to the IRS, there’s renewed buzz about an age-old topic: what tax information can the IRS get? Under the U.S. Constitution, you can’t be made to testify against yourself. You can assert your Fifth Amendment rights and decline to answer IRS questions, even in front of a judge.

Thanks to attorney-client privilege, if you share with a tax lawyer that you have failed to disclose income or assets in and offshore account, the IRS cannot force your lawyer to talk. The IRS cannot make your lawyer produce your documents with a summons or subpoena. If you request that your lawyer obtain your foreign bank records, your lawyer cannot be forced to hand them over to the IRS. On the flip side, if you obtain your own foreign bank records, the IRS can demand them and the court will back them up.

So if you need to share your circumstances so as to devise a strategy to work out your offshore issues with the IRS, you can do so with the assurance that seeking legal advice is protected as you seek out your legal options. Accountants, however, do not have this privilege. An accountant, CPA, or enrolled agent can be compelled to divulge any statements you make or documents you provide no matter how incriminating, nor their desire to not divulge that information. The accounting profession lobbied the government for its own privilege back in the 1990s, and a statutory “tax preparation” privilege was added in 1998 (IRC Section 7525(a)(1)). Unfortunately it does not apply to criminal tax cases, and most any IRS case can be framed to be walking the criminal line, so it is of little value to most taxpayers with significant tax problems.

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