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The IRS will never consider any tax problem resolution until all due tax returns have been filed. All missing tax returns must be filed and posted first. We can easily determine a delinquent taxpayer’s status with the IRS by obtaining “Records of Account”.
Many people don’t file their taxes simply because they cannot pay their taxes. One important thing to know is that the penalties for not filing a tax return grow much faster than those penalties for not paying. Even if you are owed money on your return and you have not filed, the IRS can deny you a refund on those amounts if enough time passes.
When a taxpayer doesn’t file a return, the IRS uses existing information in its system to determine if the taxpayer is at risk for owing tax. The information in the IRS system includes forms provided by third parties such as employers, like your W-2, 1099 and 1098 forms.
When the IRS uses this information to estimate a taxpayer’s debt, it does not consider the taxpayer’s filing status or deductions because the IRS doesn’t know what he or she is eligible to claim on an unfiled return. Therefore, just because the IRS thinks the taxpayer might owe doesn’t necessarily mean that he or she will.
The only way to know for sure is to prepare the unfiled return. Almost always the amount the IRS claims the taxpayer owes is hugely reduced after filing a proper tax return, also substantially reducing penalties and interest. The IRS will generally adjust a taxpayer’s account to reflect the correct figures.