If a taxpayer has not filed tax returns for past years, there is a fear that criminal charges will be involved. If handled properly, the IRS is just interested in making sure the past due tax returns are filed and do not proceed criminally. However, a taxpayer will still be responsible for tax, penalty and interest for the past due returns.
Even if a taxpayer has not filed a return, the IRS is allowed to file a substituted return for the taxpayer. When this is done, the IRS will file the tax return either at the Single or the Married Filing Separate rates (resulting in higher tax rates). Dependents to whom you may be entitled are not taken and none of the itemized deductions to which you may be entitled are taken. Additionally, if the taxpayer is paid by 1099 and not W-2 because he or she has his or her own business, a substitute Schedule C will be prepared by the IRS but none of the business deductions that the taxpayer is entitled to will be taken.
If a substitute return has been filed by the IRS and they are attempting to collect the tax, penalty and interest from you, you still have options regardless of the year of the return. While the IRS does not have to accept past due returns prepared by the taxpayer once the IRS has filed a substitute return, if handled properly, the past due return will be accepted. The end result is that the past due return will have the proper deductions, filing status and dependents and will usually severely reduce the tax owed by the taxpayer which will reduce the penalty and interest owed.
Should you want a free consultation to evaluate your current situation regarding non filed tax returns or substitute returns that may have been filed by the IRS for you, please e-mail me at helptax@consolidated.net or contact me at either (412) 926-0791 or (724)612-2993.