Today I'm going to be talking to you about unfiled tax returns. This is a very scary subject for a lot of people. I have a lot of people that come to my office and for whatever reason, they fell behind on their filings and it just snowballed from there. In this video I will tell you why you should get those unfiled tax returns taken care of.
Video Transcript - Unfiled Tax Returns
It's time to get down to the brass tacks. My name is Mel Sams and I'm the managing associate of Sams CPA. Today I'm going to be talking to you about unfiled tax returns. This is a very scary subject for a lot of people and I have a lot of people that come to my office and for whatever reason, they fell behind on their filings and it just kinda snowballed. You know, they missed one year and then the next year they said, "Well, I didn't do the year before, so why should I do this one now?" And it just gets out of control. So the way I break it down for those folks and please understand you're not alone. There are many people who have this issue and it is an issue that needs to be dealt with and a CPA such as ourselves, we can take care of that for you.
But the first question people ask me is, why should I file? I'm seven years behind on my taxes. I haven't filed in seven years. Why should I file now? Well, there are a couple reasons why. Number one, statute of limitations, which means the time in which the IRS can come back and audit you begins once you file the return. There's usually a three year window. Now it can vary, but most of the time, it's three years. That window of time and that clock doesn't start running until you file. So if you have never filed the return, well, you're open for audit. You could be audited back to whenever the last return you didn't file, no matter how many years ago it was. So the three year rule does not apply when you haven't a filed a returns. You believe that you have tax debt in excess of what you can afford to pay. And we're going to do a video about offers and compromise coming up very soon.
But if you're interested in doing that, you're not going to be able to, if you have unfiled returns. You need to be current on all of your filings. So anytime you want a forgiveness or an abatement or reduction in fees, penalties, whatever, you have to be current on all your filings or the IRS is not going to talk to you about that. And thirdly, a good reason to file is because whenever you go to buy a house or buy a car or purchase anything or borrow money invariably you're going to be asked for tax returns. And I have a lot of people to come to me that say, "Hey, I've decided I want to buy a house. I went to the bank, they said they need my last three years tax returns and I haven't filed in 11 years."
So again, you're not alone. It's a common problem. We can help you with that. Second thing. What if I owe money? It's a good question. The first thing I'll say to that is that most people who think they own money, don't. Most of the unfiled return cases that we handle, the taxpayer would have gotten refunds. It's not common where people have large sums of money that they owe in taxes and just haven't filed. A lot of people have left refunds on the table unnecessarily just by not filing. But if you do owe money, the first thing we have to do is file the return and if we're going back a long period of time and the records may not be great, that's fine. The best thing we can do is just get something filed. We will do our best to estimate what income and expense may have been and we can also pull records down from the IRS to see what was reported to you, the taxpayer, in terms of income. So if you owe tax, don't worry.
The first step, it's not going to go away. The first step is getting those unfiled returns submitted, seeing what we owe and then addressing how to pay that tax and that could be through a payment plan or again through an offer in compromise, which we're going to talk about in a video very soon.
Finally, you've come to see me, we've gotten your unfiled returns filed, what to expect now. The IRS is probably going to take 60 to 90 maybe even 120 days to process everything, and when they do, you will probably begin receiving letters. Now, generally if three years has passed, whether you filed or not, if three years has passed and you were due a refund, the IRS is not going to give you that refund. They're going to send you a letter that says, we're sorry but we're keeping your money because you didn't file.
Now there are hardships and other things we can use to try and get a reversal of that. So again, all the more reason to file, you think you owe money, you end up not owing money, and if you don't file, it's hard to get those refunds. But again, after you file, you'll probably start receiving correspondence from the IRS. Put that in an envelope, get it to your CPA as soon as it comes in, let them take a look at it. Chances are a lot of it's going to be informative about the filings, and then once all correspondence has been received for the years filed, then it's possible to go in and look at that offer in compromise, or look at that payment plan, but again, got to get the returns filed first. And we can certainly help you with that. So give us a call. We deal with people on a regular basis who have unfiled returns.
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