Unfiled 2013 returns + related state issues

[FEDUKE404]

Just found out a (friend of) client wants to finally get around to filing 2013 tax returns. (We first discussed this issue back in November. . .)

I know they are pretty much out of luck with IRS, but how does that carry over to states involved? Stated differently, does the (likely) absence of a filed federal return for 2013 indirectly also close the door on states for 2013?

States involved are (at least) VA and KY, and I know for a fact that VA always has a fiiing deadline of May 1st.

Suggestions from anyone who has been there?

Thanks.

FE

[Burke]

I have filed state-only VA returns. You should be able to file them under the 3-yr guidelines using the 5/1/17 date whether or not the federal has been filed and receive a state refund. Since VA uses federal AGI to start with, they may eventually want to see the federal return. You can file the 1040 anytime, just might not get a federal refund.

[FEDUKE404]

Out for VA perhaps

I have filed state-only VA returns. You should be able to file them under the 3-yr guidelines using the 5/1/17 date whether or not the federal has been filed and receive a state refund. Since VA uses federal AGI to start with, they may eventually want to see the federal return. You can file the 1040 anytime, just might not get a federal refund.

Thanks. As you mentioned, I was concerned what would happen if VA/KY "look for" the companion federal return, which I assume will not be there. I'm sure computers and data bases only compound that potential problem.

It still amazes me that I was ready to work on these returns in November. . .and then hear from client on afternoon of April 15th. (I've never seen a W2 or 1099 or prior year return. . .totally in the dark.)

I love to help my clients, but I cannot perform miracles!

FE

[New York Enrolled Agent]

I know they are pretty much out of luck with IRS, but how does that carry over to states involved? Stated differently, does the (likely) absence of a filed federal return for 2013 indirectly also close the door on states for 2013?

It is never too late to file a tax return for any year where the taxpayer has failed to file. The statute of limitations only starts when a valid tax return is filed. The period for assessment never ends on an unfiled return.

You are no doubt hinting at securing a refund for the taxpayer. Whether that is possible or not is irrelevant. You should always prepare a return for the taxpayer.

[Snaggletooth]

Ethical Issue

It is never too late to file a tax return for any year where the taxpayer has failed to file. The statute of limitations only starts when a valid tax return is filed. The period for assessment never ends on an unfiled return. You are no doubt hinting at securing a refund for the taxpayer. Whether that is possible or not is irrelevant. You should always prepare a return for the taxpayer.

I'm going to take the NYEA to task on this by asking an ethical question. Assume you are filing old returns. 2013 has a refund, 2015 has a refund, and 2016 has a refund. The other return, 2014 has a large balance due.

The upstanding thing to do is to file all returns, 2013-2016. However, the client does not want you to file 2014, and even if you protest, tells you he will not pay you to file the return.

Keep in mind that it is not our function to be a collection agent for the IRS. But given the situation above, what is our ethical responsibility? Refuse to file ANY returns? File ALL paper returns and leave the client to mail in those returns he chooses? Spend a couple hours filing a return that you won't be paid for?

[Uncle Sam]

Unfiled Returns

Your obligation is to inform the client of his/her obligation to be tax compliant.
If I was faced with that situation - I would insist that I prepare all returns involved and let the client
decide as he/she wishes and request a hefty up-front fee.

I was actually faced with that situation early this tax season.

A client came to me originally to advise on required business accounting for her husband who became
self employed during the tax year (for which I was paid). In the process of discussing the required
accounting records needed to be kept (wife knows enough to prepare spread sheet format accounting
information) the tax return got discussed.
She mentioned that for all these years she and husband were filing MFS returns so I asked to take a look
at them. This was a happily married couple with 2 children, lived under same roof for whole year. No domestic
or divorce issue at all.

Once she brought them in - I saw trouble. Both returns were prepared by different preparers, one spouse filing
single, the other HOH. One took standard deduction, the other itemized. Neither return had Soc Sec of other spouse.
I advised them that in order for me to prepare 2016, I needed to amend all 3 prior year returns.
(Oh yeah - the 3rd year both returns were prepared by the SAME preparer).
Within that week - the client called to pick up her stuff - she was going somewhere else.

So the issue is to comply with the rules regardless of what the client feels or says. If a client doesn't wish
for me to prepare a return for a year he/she knows they'll owe money on and only prepare ones for years
of refunds - I don't need that client.
That's our ethical responsibility.

[Burke]

Thanks. As you mentioned, I was concerned what would happen if VA/KY "look for" the companion federal return, which I assume will not be there. I'm sure computers and data bases only compound that potential problem.

FE

Your title on this post indicates "Out for VA Perhaps." You can still file VA up until 5/1/17, whether or not he files the federal. Whether it can be e-filed depends on your software. But it can be unlinked from the federal. (I had to do paper returns for 2013. My software said it could not e-file 2013.) At least this would preserve his timely filing for a potential refund. He could still file the federal later, although forfeiting any federal refund.

[FEDUKE404]

Update to clear the waters

As I mentioned, this person was not a client but a "perhaps" client. No past or current returns (or tax paperwork!!) have ever crossed my desk. So to a large extent I'm flying totally blind.

All I know is that back in November I was approached about preparing unfiled 2013 and 2014 federal and state returns for parent and adult child who has lived in various states since prior to 2013. Returns would be federal and likely also involve VA / KY / CT. I explained what I would need, it was doable with adequate information. . .and I never heard another squeak until this past weekend.

Apparently parent has since prepared/filed own 2013 returns, to include those for adult daughter who now lives in a different state. Parent stated long-standing POA was used for daughter's returns. Daughter is now ~30 YOA. (And parent put "old" address(es) on the 2013 returns. . .since that's where the daughter lived at that time. . . ) Supposedly the mother of daughter's significant other did crank out some 2015 returns for her. 2016 ??

I was willing to help, especially in the off-season, but it appears I now will have no dog in the 2013 hunt. I shudder to think what might possibly await me for 2014, 2015, and 2016.

FE