Unfiled Tax Returns – 5 filing tips

Unfiled Tax Returns -5 tips

1. Mail them. Late tax returns can’t be filed electronically. They must be mailed in and to a specific address. Visit the IRS. Gov website to find the address that most accurately fits your description.

2. Hand deliver the returns. If time is of the essence and you need proof that you filed a particular return by a certain date,make a photocopy of the return and take the original and the copy to the IRS office locally.The stamped photo copy proves where and when.

3. Send certified. Certified mail provides proof that each return was received by the IRS. Do it. Don’t take chances. If you don’t send by certified mail, than follow up with the IRS to make sure they recieved the return by asking for an “account transcipt” that will show a return was filed by you and when.

4. Mail in separate envelopes. If sending certified, mailing separately will ensure each return has it’s own date stamp and certified mail receipt. This could come in handy later when the IRS says they didn’t recieve it on time or at all. This may also prevent the IRS from missing a return altogether that has been lumped together with others.

5. Speak to counsel. If you have a number of unfiled returns, it may be wise to speak with a tax attorney as you begin the process.

Filing Late Tax Returns – 3 Important Rules to Know

Filing Late Tax Returns

1. IRS filed returns can be changed. The IRS constantly files returns for non filers based on income information it has recieved. The returns are almost always incorrect and overstate the taxpayer’s liability. The IRS uses these returns to get the taxpayer’s attention. The good news is that the correct return filed correctly will almost always eliminate the IRS filed return. So don’t panic if you are getting bills for years you haven’t filed, just create the correct return.

2. Statute of limitations rules play a big role in the filing of late tax returns.

a. The first rule is that the refund for a tax return is lost forever if the return is filed more than three years after it was due.  This rule affects many more taxpayers than you would think.  The IRS makes a large profit each year on the number of returns left unfiled with refunds due.

b. The second is the statute of limitations related to collecting tax debt. The Service has 10 years to collect a debt from the date it was assessed. They tend to apply this rule to returns they have completed and assessed. If the substitute return was assessed 8 years ago for example and shows $100,000.00 in debt, it may not make sense to file the correct return even if it reduced the debt to $10,000.00 depending on your current financial situation. It may make more sense to let the clock kill the debt and avoid the hassle of completing the returns.

c. The third is the deadline the IRS has to audit a return. An honest return can only be audited within 3 years of assessment.

3. The IRS can stick you with penalties and interest on tax debt not paid in full by the deadline for filing. Late filing and late payment penalties can be very large and can be difficult to remove.

Tax Debt – 6 Common Reasons Bankruptcy is Used

bankruptcy-courtNo matter what you have heard, a bankruptcy filing, motivated by tax debt, is a common occurrence.

The reason is obvious. There can be significant benefits to filing bankruptcy.

6 of the most important potential benefits are as follows:

1. The Automatic Stay

“Automatic Stay” is the common term used to describe that section of the bankruptcy code that governs what creditors must do or stop doing, once a bankruptcy is filed. It applies in every bankruptcy case. This law requires that almost every creditor in almost every situation, stop collection activity once the case is filed. This includes the IRS.

If the IRS has proper notice of the bankruptcy, the filer can actually sue the IRS for violation of the Automatic Stay Provision and recover actual damages including court costs and attorney fees, if the automatic stay provision is violated.

2. Elimination of Tax Debt after Discharge

The most obvious reason to file the bankruptcy, is the ability to get rid of the debt. As I often say, “believe it or not” certain income tax debts can be wiped away in bankruptcy along with accumulated penalty and interest. Determining “dischargeability” can be more complicated than it seems. Use of experienced legal counsel is a must.

3. Threat of Bankruptcy in an Offer in Compromise

A good bankruptcy candidate may be able to use threat of bankruptcy to obtain a better offer in compromise without ever having to file. The key? A good bankruptcy candidate and experienced legal counsel.

4. Force payment plan

In a chapter 13 bankruptcy a payment plan can be forced on the IRS, if the IRS won’t agree to a better and more reasonable payment plan outside of bankruptcy

Whether the plan is approved is not up to the IRS, but decided by bankruptcy law and the bankruptcy judge.

5. Deal with all other debt at same time

Most with serious tax debt have other debt problems as well. Credit card debt, medical bill debt, foreclosure issues, business related debt etc. etc.

A bankruptcy, chapter 7 or 13 depending on which best fits, can deal not only with the tax debt but also with these other problems, via discharge, cramdown, or payment.

6. Re-determination of Taxes Due

The bankruptcy code allows the Bankruptcy Court to redetermine the amount of tax owed.
Bankruptcy can be used to determine the amount of the debt even if you lost the argument in tax court.

If you have serious tax debt, you should talk to an attorney experienced in the relationship between tax debt and bankruptcy in order to find the best solution to the problem.