Getting help with unfiled tax returns is tough. Many tax relief companies claim to help but are not reliable. See our explanation on unfiled tax help and if it’s something you do not want to do alone we provide contact information for real help. For specific questions regarding unfiled tax returns, see our post on unfiled tax return frequently asked questions.
You can see a video version of this guide below or continue down further to read about unfiled tax help and what to do with those missing returns.
Unfiled Tax Help Is Here: But Do Not Always File All Unfiled Tax Returns
One of the biggest mistakes many tax preparers and tax relief companies make is filing all unfiled tax returns. Sometimes the IRS just is not looking for it and you added a balance for nothing. In California, the Franchise Tax Board might need a tax return when the IRS does not. Too often we see clients who had tax preparers or tax relief companies working on their case that did this part wrong.
Reasons to not file old tax returns:
- IRS balances are already close to expiring because the IRS did the tax returns for you. This is also known as getting close to the CSED (Collection Statute Expiration Date).
- The IRS did the tax returns for you and the balance is lower than what it would be filed.
- You are filing an Offer In Compromise anyway and the IRS already filed the older ones for you. You may need to file later years if there is a filing requirement.
- The IRS is not asking for it. If they did not put a 140 code and it’s an older year, they might not ever ask for it.
Reasons to file old tax returns:
- The IRS made returns with much higher balances than they would be if you filed.
- They are required but not yet filed by the IRS.
You can find old tax forms here if you do end up needing them.
Unfiled State Tax Returns: Sometimes You File State and Not IRS
When it comes to unfiled state tax returns it is really case by case, state by state. For California tax debt it is typically required to have all tax returns filed in order to get an FTB Offer In Compromise. There may be exceptions to very old years.
Generally all returns are also required for a New York State Offer In Compromise. Dealing with unfiled state tax returns is a case by case issue. It’s recommended to contact qualified tax relief attorneys to get a proper evaluation.
The Biggest Mistake We Have Seen In Unfiled Tax Help
Most tax preparers are not well versed in tax relief. They handle tax preparation and that is just fine. The biggest mistake we see from these preparers on tax relief cases is they have the client file all missing tax returns.
Why is filing all missing tax returns such a big mistake in some cases? Sometimes it is not unfiled tax help, it is actually hurting
Sometimes as mentioned above the debt is getting close to expiring or the IRS came up with a lower balance. These preparers just file “everything that is missing” based on what the client thinks. They do not actually call the IRS, check for 140 codes, check for Substitute For Returns, or take into account CSED dates.
When an Offer In Compromise is the end result anyway, this mistake often has no effect. However, when the client’s best result is a payment plan or Currently Not Collectible status, the uninformed tax preparer and client could be making a huge mistake. By filing the tax return they are extending the time the IRS has to collect. They also might be posting a bigger balance than the IRS has already put there. Same thing can happen with states too.
Examples of when unfiled tax help has gone wrong due to inexperienced preparers
Example A: Unfiled Tax Returns For Multiple Years, No Letters
Johnny has not filed tax returns for 11 years. It is now 2018 and Johnny wants to get caught up with the IRS. Johnny has never gotten any letters from the IRS and he lives in Nevada so there are no state income tax issues. He goes to a local CPA who files all the tax returns Johnny asks for. Johnny then sends them into the IRS and receives a huge bill. 2007, 2008, and 2009 by themselves are $20,000 total.
It turns out the IRS was not asking for any tax return prior to 2010. Johnny filed 2009, 2008, and 2007 when he did not need to. Had Johnny had a tax relief expert, they would have called and see what Johnny was required to file. He added a $20,000 balance that now expires in 10 years. Unless he is getting an Offer In Compromise, Johnny will most likely end up paying $20,000 more than he had to.
Example B: Self Employed Business, Some Substitute For Returns, Some Unfiled
Jake owns an auto body shop and has file the last two years of tax returns, 2016 and 2017, but is missing several returns before that. The IRS sends him bills but he has never filed so he does not know what those bills are for. Jake goes to a local CPA who files 2008 through 2015. Jake gets a bill for all of his tax debts and is in collections.
What Jake did not know is the IRS sent bills because they did Substitute For Returns (SFRs) for 2008, 2009, and 2010. He really only was required to file 2011, 2012, and 2013. When the CPA filed the tax returns over the SFR’s, it was for a higher balance. This is a rare case, but it does happen.
If Jake qualified for an Offer In Compromise, it also is a waste of time and money to file 2008, 2009, and 2010 if he still owes a significant balance. The IRS will accept an SFR as a filed return when you submit a settlement. In these cases you just file the in between years and proceed on the settlement.
When it comes to California Franchise Tax Board Offer In Compromise, he might be required to file if he wants a chance at success (there are sometimes exceptions for very old years, case by case). As mentioned above, sometimes you file state and not IRS. It really depends on the case.
Taking The Next Step With Unfiled Tax Returns
The next step is actually resolving it. You can hire a qualified tax relief professional, but it is recommended to avoid tax relief companies. You can do it yourself, just make sure to not file what you do not need to. If the IRS has never sent you a letter, they might not be looking for you if you have had the same address for some time.