Not Filed Taxes in 8 years

[photoman]

I have someone that called and is coming in monday. He claims that about 8 yrs ago he stopped filing and is a W-2 employee. Says he basically has had nothing taken out of W-2 and now wants to correct his wrongs and do what is necessary to come clean with IRS. I told him to bring in all W-2s and information he has for these years and I would take a look at it. This is my first with This. Does anyone have any advice for me on how this should be handled or point me in the direction of advice on this .

[BOB W]

I guess I'll be the first,,, get paid before you start.

[JohnH]

Why did he stop having taxes withheld?

Maybe he had low income and his tax liablitites were low or non-existent, possibly eligible for EIC. In that case it should be fairly easy to rectify. He won't receive any refund which might be due for years outisde the SOL, but he will have to pay for years he owes, plus penalties & interest.

On the other hand, if he had high income and fell under the spell of some tax protester movement, then you have a can of worms. I'd probably decline this type of client and suggest he see a tax attorney.

Whatever the case, I entirely support Bob's suggestion. If you're going to do any work for him, get your money up front. Once he starts getting the IRS and state notices, you'll be the last person on his "to pay" list.

[dyne]

I made it a RULE not to prepare delinquent returns because:
1. It is lot of trouble to go back that far to prepare returns.
2. I do not really want these types of people as clients.
3. They tend NOT to pay me.
4. They tend NOT to come back next year to have me prepare their returns.
5. I delete tax software from my computer after 4 years.
Sometimes I make an exception and prepare one or two delinquent returns.

[photoman]

Response

Thanks for the good information. I do not have a total picture of his issues yet but he says in 09 he made about 30,000 and this is his higest earnings yet. He is single and was sent to me by a very good client. I think his issue was that he at first needed money and then just let it go on and then got afraid to do anything. After I look things over and if I take I will take your advice on payment. Should I go on and file all 8 yrs and also do all at once together. Would that be best.

[BP.]

I made it a RULE not to prepare delinquent returns because:
1. It is lot of trouble to go back that far to prepare returns.
2. I do not really want these types of people as clients.
3. They tend NOT to pay me.
4. They tend NOT to come back next year to have me prepare their returns.
5. I delete tax software from my computer after 4 years.
Sometimes I make an exception and prepare one or two delinquent returns.

Thanks for the reminder on a new rule I wanted to start yesterday. And all the good reasons why.

[JohnH]

The general response is to file each year in a separate return, just to head off the possibilty that someone at IRS would staple 2 years together if more than 1 year is in the same envelope. I'd probably follow that advice and mail each year separately, and use certified mail with return receipt just for the documentation.

Pay particular attention to 2006. The SOL runs on that year this Apr 15, so if there's a refund be sure to get it in the mail well before the due date. I'd probably send it via Express Mail even now, just to be sure there's no question about it being received by IRS before Apr 15. On the other hand, if there's a balance due then there's no special rush (beyond just the basic task of getting it done).

[outwest]

I made it a RULE not to prepare delinquent returns because:
1. It is lot of trouble to go back that far to prepare returns.
2. I do not really want these types of people as clients.
3. They tend NOT to pay me.
4. They tend NOT to come back next year to have me prepare their returns.
5. I delete tax software from my computer after 4 years.
Sometimes I make an exception and prepare one or two delinquent returns.

1. I get paid for my trouble and I decide when I'll work on them. (summer)
2. Only the sick need a doctor
3. I get paid up front.
4. So what? I made good money on them this year.
5. I have the last 10 years loaded and uncle fed has the old forms.

That said, if I interview them and don't get good vibes, they are on their own. But if they want to come clean and get in compliance, why should I stand in the way?

As others have noted, often they are miss one year and are afraid to come back in. Sadly, they IRS has not bothered them because the government is happy to keep their refunds. Stupidity has it's price.

[Bees Knees]

I just completed a multiple year filing for a new client that hadn't filed since 2001. I had him go to the local IRS office in St Paul and hand deliver them. These were returns where the IRS had already filed for him, assessed the tax, and was in the process of putting a levy on all of his bank accounts.

When my client brought them into the IRS office and explained the situation, the lady stamped each return as filed and said he would get a confirmation letter in the mail, along with an adjustment to the actual tax due, plus penalties and interest.

Everything went smooth and he is now caught up to date on his taxes. I would advise anyone filing late multiple returns to personally hand deliver them to your local IRS office, no matter how far along they are in the collection process.

Of course, I got a huge retainer up front before I started any work, and I charged by the hour and billed him for every minute spent on his case. But now he is a good client who files his returns on time, and I made a ton of money off of him.

[RitaB]

Sometimes it works out

One of my now favorite clients was a late filer. I had to prepare about four returns for him three years ago. His father had passed away, he was depressed, and he just sort of checked out with his tax obligations. He is doing fine now; has already filed for this year and paid me. He ALWAYS shakes my hand, looks me right in the eye, and says, "Thank you so much." And, I know he is thinking about the state he WAS in vs. his outlook now. Very nice gentleman.

On the other hand, these are usually stinkers, so charge accordingly. I'm just sayin.

[DaveO]

I’ve had a bunch of these multi-year filers. I don’t really mind unless I have to go back or far I’m doing returns by pencil. I get a retainer up front and charge accordingly. Most have been fairly simple returns although a few have been messy. I send the tax protester types packing right off and only work with those who are serious about cleaning up their act. I get the occasional OIC job which can pay very well.

[JohnH]

I completely forgot about taking the returns into the local office. Much better that mailing, although lots of folks do shy away from interacting with IRS personally. Nevertheless, thanks for that reminder, Bees.

[BP.]

The call I got yesterday was from a guy who said he stopped filing in 1997 when he divorced, and said he has no records at all. He sounded a little flaky, so this one's probably going under dyne's rule.

[BP.]

I would advise anyone filing late multiple returns to personally hand deliver them to your local IRS office, no matter how far along they are in the collection process.

It's a good idea- I have a mapquest map to the local office that I print and give to people.